1 2 3 4 5 6 KERR COUNTY COMMISSIONERS COURT 7 Emergency Session 8 Monday, December 23, 2002 9 9:00 a.m. 10 Commissioners' Courtroom 11 Kerr County Courthouse 12 Kerrville, Texas 13 14 15 16 17 LAW ENFORCEMENT LIABILITY INSURANCE 18 19 20 21 22 PRESENT: FREDERICK L. HENNEKE, Kerr County Judge 23 H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 JONATHAN LETZ, Commissioner Pct. 3 24 ABSENT: WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 25 LARRY GRIFFIN, Commissioner Pct. 4 2 1 On Monday, December 23, 2002, at 1:00 p.m., an emergency 2 meeting of the Kerr County Commissioners Court was held in 3 the Commissioners' Courtroom, Kerr County Courthouse, 4 Kerrville, Texas, and the following proceedings were had in 5 open court: 6 P R O C E E D I N G S 7 JUDGE HENNEKE: All right. It's 1 o'clock in 8 the afternoon on Monday, December 23rd. We'll call to order 9 this emergency meeting of the Kerr County Commissioners 10 Court, which is called pursuant to the applicable provisions 11 of the Texas Local Government Code. Let the record reflect 12 that all -- that a quorum of the Commissioners Court is 13 present. The item for consideration is consider and discuss 14 status of the law enforcement liability insurance. Tommy, 15 are you going to present, or Jack, or whom? 16 MR. TOMLINSON: Jack's going to present. 17 I -- just for the record, Jack is our agent of record for -- 18 for this coverage, and he has gone out on the market and 19 sought some quotes, and we -- we now have all that's 20 available or that we can find. So -- and Jack will explain 21 the options to you. 22 MR. FURMAN: Gentlemen, there are a number of 23 options here, and I'll be happy to explain them. The -- the 24 first column is limits, and the first number is per 25 occurrence and the second number is aggregate, which means 12-23-02 EMG 3 1 per policy year. There are also a couple of deductible 2 options on the -- on the Sheriff's Department side. And 3 then, on top of that, just to confuse your life some, I 4 asked for two different policy forms to give you all an 5 option from a money standpoint. We talked last year about 6 occurrence and claims made forms. I think you'll find most 7 insurance agents will recommend the occurrence form because 8 of its permanency, but the claims made form is going to be 9 less expensive the first year you buy it. 10 COMMISSIONER BALDWIN: Excuse me, Jack. 11 Trying to communicate here, sorry. 12 MR. FURMAN: All right. 13 SHERIFF HIERHOLZER: I didn't know if he 14 needed this one back or if he had another one. 15 MR. FURMAN: I think he grabbed another one. 16 Claims made forms usually have a retroactive date, which 17 means that policies that -- claims are covered if both the 18 claim is made during the policy period, and the event that 19 -- of which the claim arose occurred on or after the 20 retroactive date. So, what happens is, on a claims made 21 form, is that the premium is going to be lower the first 22 year because there's less likelihood of a claim. And then, 23 with time it goes up until it's the same thing as an 24 occurrence form. That happens, depending on the company, 25 in -- in two, three, or four years. I believe she told me 12-23-02 EMG 4 1 that the claims made form was 72 percent of the occurrence 2 form. At any rate, it's something along that line, but 3 that's only for the first year. We would always recommend 4 the -- the occurrence form, but I did want to show you the 5 other. 6 COMMISSIONER LETZ: Jack, what do we have 7 right now? An occurrence form? 8 MR. FURMAN: You've had an occurrence form -- 9 well, I need to explain another place, so let me answer your 10 question and then back up a little bit. You've had the 11 occurrence form for about five years. Prior to that time, 12 you had a claims made form with a retroactive date that went 13 back into the '80's. This is through the National Sheriff's 14 Association. The carrier is C.N.A. They will maintain that 15 old retro date, even though it's an occurrence form. They 16 will cover any claim that arose between the time the 17 occurrence started and the claims made policy was originally 18 written. They will maintain coverage for that, even though 19 it's an occurrence form, but that will all disappear if we 20 change from occurrence to claims made. We'll pick up a new 21 retro date. If we didn't pick up a new retro date, then 22 we'd end up with the same premium. 23 JUDGE HENNEKE: What's our current deductible 24 and limit? 25 MR. FURMAN: The current deductible is 12-23-02 EMG 5 1 $10,000, and the limit is $1 million/$2 million. 2 JUDGE HENNEKE: $1 million/$2 million. 3 That's on both the Detention Center and the jail? 4 MR. FURMAN: Yes, that's on both. 5 JUDGE HENNEKE: If we stay with what we have 6 now, how much is that going to increase our premium? 7 MR. FURMAN: Well, it's a fairly significant 8 increase. 9 MR. TOMLINSON: It's about -- it's better -- 10 a little better than 50 percent. 11 JUDGE HENNEKE: So, right now we're playing 12 -- we're paying somewhere in the neighborhood of $43,000, 13 $44,000 for the Sheriff's Department, and it will go up to 14 85? 15 MR. TOMLINSON: No, it's 53 for -- for an 16 occurrence policy right now. 17 JUDGE HENNEKE: For both of them, or just -- 18 MR. FURMAN: No, just the Sheriff. The 19 Sheriff's. 20 MR. TOMLINSON: Just the Sheriff's. 21 MR. FURMAN: The Sheriff's Department has, as 22 you can see, the larger increase. The across-the-board 23 increase for people who haven't had claims, she told me, is 24 40 percent -- about 40 percent. And you can see that in the 25 Juvenile Detention. 12-23-02 EMG 6 1 JUDGE HENNEKE: So, what do we pay now for 2 Juvenile Detention? 3 MR. FURMAN: The Sheriff's Office has had -- 4 over the past history, although happily nothing in 2002, has 5 had some claims that amount to better than 80 percent loss 6 ratio over a five-year period. 7 SHERIFF HIERHOLZER: We were notified of one 8 last week. 9 MR. FURMAN: You did? 10 SHERIFF HIERHOLZER: Motley's going to be 11 sending it. 12 COMMISSIONER LETZ: What -- what's the number 13 of, I guess, claims we get a year, on average? 14 SHERIFF HIERHOLZER: Well, we have a lot of 15 old ones that are pending. You know, prior to 2000. 16 COMMISSIONER LETZ: Well, I guess what's the 17 number on average each year of the claims we get? I'm 18 looking more on the deductible side. 19 MR. FURMAN: Probably two or three. 20 COMMISSIONER LETZ: Two or three a year? 21 MR. FURMAN: I'm sorry I didn't bring any of 22 that claims information, but probably two or three. 23 COMMISSIONER LETZ: And the deductible is -- 24 is a total for the year, or is it a -- 25 MR. FURMAN: The deductible is a -- 12-23-02 EMG 7 1 COMMISSIONER LETZ: -- per claim? 2 MR. FURMAN: It's per claim. The deductible 3 applies to the attorneys, as well as anything that's paid 4 out. 5 SHERIFF HIERHOLZER: One thing about that, 6 we've had two or three of the old ones that have been 7 claims, and I think all those that the attorneys have worked 8 on have averaged pretty close to anywhere from $35,000 to 9 $45,000 that the attorney's fees and the different fees have 10 added up to. That had to be paid even though the lawsuit 11 was eventually thrown out. So you're still going to have 12 those attorney fees add up between $30,000 and $40,000 13 easily. 14 MR. FURMAN: I wish I had brought one. There 15 was -- there's one -- and Rusty probably knows the when's 16 and where's of it, but somebody died in between the time the 17 suit was filed. The company thinks it has zero merit. In 18 their reserving -- do I need to explain reserving? In their 19 reserving, they have put no money for a claim payment. It's 20 all on -- on the adjustment expenses, on the legal expenses. 21 And it's around $42,000, my best memory. In all of this 22 time, I think there is one claim reserved that has a little 23 bit of money base for -- based on when you say merits, where 24 they think there is some liability. And there was one paid 25 where there was -- where they thought there was some 12-23-02 EMG 8 1 liability, and that's over the last five years. So many of 2 these things that -- that the Sheriff's Department is faced 3 with -- 4 SHERIFF HIERHOLZER: I think there was one -- 5 MR. FURMAN: -- are jailhouse-type suits. 6 SHERIFF HIERHOLZER: Well, I think there was 7 one that went all the way to a federal trial and got thrown 8 out by the federal judge during the middle of the trial. 9 But, if I'm not mistaken, those claims, just the attorney 10 fees on that one were close to $60,000 or $70,000. 11 MR. FURMAN: Could be. 12 SHERIFF HIERHOLZER: Okay. That had to be -- 13 had to still be paid even though the suit was thrown out. 14 MR. FURMAN: The biggest claim in the -- in 15 the group was a little over $70,000, after the deductible. 16 COMMISSIONER LETZ: Tommy, what did we budget 17 this year for that? 18 MR. TOMLINSON: We budgeted 60 for -- for the 19 Sheriff's -- for law enforcement alone. Juvenile, we -- we 20 have close to what this is. I think it's $13,000, I 21 believe, for insurance. 22 MR. FURMAN: Because I read the paper and 23 because I know y'all are tightly budgeted, I wanted to show 24 the claims made, because it does cost less. But bear in 25 mind that it comes up later with increased premiums over 12-23-02 EMG 9 1 time. Some of that depends on the market, and the best 2 thing that can happen is for -- is for the County to 3 experience fewer claims. And I really think maybe that's 4 happening now. I really think maybe that's happening now, 5 but only time will tell. That's events that they sue over 6 that usually happen in one year, and the suit comes six 7 months to a year and a half later. 8 SHERIFF HIERHOLZER: And it is true we're 9 having a lot less actual claims right now. Now, in the last 10 year, we've had a lot -- a lot more probably threatened 11 claims, you might call it, or threatened suits and that. 12 Now, you know, 95 percent of those don't ever materialize 13 into anything, but we do get them constantly. 14 COMMISSIONER LETZ: But I think -- I mean, in 15 today's society, whether we like it or not, I don't think 16 we're going to have less suits filed. We're going the other 17 direction -- sliding in the other direction, more suits. 18 JUDGE HENNEKE: We have more prisoners. 19 SHERIFF HIERHOLZER: I've got about three -- 20 three in the jail at this time that are threatening they're 21 going to do all this and that and everything else in the 22 world. I've got one notification of an incident that 23 occurred back in July that I just got the paperwork Friday 24 on, notifying that it would be filed in the district courts 25 here. 12-23-02 EMG 10 1 JUDGE HENNEKE: Basically, we had a -- we've 2 had a 40 percent increase in the number of prisoners in the 3 last two years. 4 SHERIFF HIERHOLZER: If you all throw in the 5 last couple months, we've really dropped down. But it's the 6 threats of the claims and just wanting small settlements 7 here and there, and that's why I don't agree with those, is 8 we're getting more -- more of them. I think that's just the 9 times. 10 MR. TOMLINSON: There's one thing about this 11 underwriter; they don't like to settle. They don't -- you 12 know, they don't like to settle. They -- they take it to 13 court. So -- 14 (Discussion off the record.) 15 MR. TOMLINSON: I was saying that these 16 underwriters don't like to settle claims. 17 SHERIFF HIERHOLZER: And I don't think we 18 should, because I think that's the only way you start 19 stopping it. 20 MR. TOMLINSON: There's some that like to. 21 SHERIFF HIERHOLZER: Because that defendant 22 or that attorney is going to get tired of filing, 'cause 23 it's not paying his part of the fees; it's just paying our 24 attorney's part of it. Somewhere, his attorney is going to 25 have to start collecting the fees or quit filing suits. 12-23-02 EMG 11 1 MR. FURMAN: Well, unfortunately, the -- 2 realistically, it is usually economical for insurance 3 companies to pay some money to make it go away. But Tommy's 4 very right; it just makes it a lot easier for the next guy 5 that comes along to get a little bit, whether there's merit 6 or not. 7 COMMISSIONER LETZ: Jack, why does it take so 8 long for us to get this? I mean, the quotes in from the 9 underwriter. In other words, why are we meeting at the 11th 10 hour? 11 MR. FURMAN: You have to ask somebody that's 12 more intelligent than me. We started over 60 days ago, and 13 I started calling two weeks ago -- about two weeks ago, 14 saying, "I haven't gotten anything yet." One underwriter 15 must have looked at it the next day, because I got an e-mail 16 asking for more information. One underwriter said, "I'm 17 finishing one today, and yours is next on the stack." And 18 then she came and asked for more information last week. 19 JUDGE HENNEKE: You know, the format -- the 20 Court made the decision to have all of the insurance 21 policies expire at the end of the calendar year, so that's 22 out of sync with the budget, but that's in sync with the 23 insurance industry. They don't look at renewals until right 24 at the end, because they want as full a claim picture as 25 they can get. So, you push up -- there is the -- 12-23-02 EMG 12 1 MR. FURMAN: Well, and -- and, frankly, this 2 is a tough time of the year, because staff for insurance 3 companies find it very convenient to take vacations 4 beginning in November all the way through December. 5 COMMISSIONER LETZ: Well, and the -- the 6 second number on the limit -- that's the $2 million -- the 7 $4 million, that's the maximum for the year? Or -- 8 JUDGE HENNEKE: That's max per claim. 9 MR. FURMAN: The second -- the $1 million, 2 10 or 4 is -- the second number is an aggregate limit, and that 11 means per policy year. Or, in your case, per calendar year. 12 COMMISSIONER LETZ: Per calendar year. 13 JUDGE HENNEKE: We have a $1 million limit 14 per claim and a $2 million aggregate limit per year. 15 MR. FURMAN: For all claims for the year. 16 JUDGE HENNEKE: What's the N.S.A. fee? 17 MR. FURMAN: National Sheriff's Association. 18 JUDGE HENNEKE: Okay. And the taxing fee? 19 Is that -- 20 MR. FURMAN: Tax is the state tax that comes 21 on -- on policies. Normally, you don't see it, but in this 22 case you do. 23 SHERIFF HIERHOLZER: Now, the $1 million 24 versus $4 million or whatever, most of the claims, like the 25 last one where the man died, that claim started out -- and 12-23-02 EMG 13 1 that's one of the higher ones I've seen, but it kind of 2 seems like the way it's going, started out as a $5 million 3 claim. And one I got notified of the other day would be 4 just barely under a $1 million claim, is what their 5 initial -- just -- that's what they want, you know, type 6 deal. That doesn't mean anything, but -- 7 MR. FURMAN: Well, if you will look at the 8 difference in premium between the $1 million/$2 million and 9 the $1 million/$4 million, you'll see there's not a whole 10 lot of difference in premium there. So, the aggregate limit 11 is not something that's reached into -- or exceeded, I 12 should say, very often. 13 COMMISSIONER LETZ: Tommy, where are you 14 going to find this money in the Sheriff's Department budget? 15 (Laughter.) 16 SHERIFF HIERHOLZER: Thank you, Jack. Only 17 thing you will hit on -- 18 MR. TOMLINSON: I mean, I don't know of any 19 money available in the Sheriff's Department budget; put it 20 that way. 21 SHERIFF HIERHOLZER: And the only one you 22 will hit several times probably each year, if you get two or 23 three, it's going to be that deductible. You're going to 24 hit that $10,000 or $25,000. 25 COMMISSIONER LETZ: It doesn't seem to me 12-23-02 EMG 14 1 that it makes sense to go the $25,000 deductible, based on 2 our historical performance. You eat up the -- 3 JUDGE HENNEKE: With one claim. 4 SHERIFF HIERHOLZER: Once you pay attorneys. 5 COMMISSIONER LETZ: With one -- exactly. One 6 claim will make up that difference, so you're better off 7 going with the $10,000 deductible. 8 SHERIFF HIERHOLZER: I don't think, in the 9 history of this department, they've ever gone over -- I 10 don't think they've ever paid out a million-dollar-a-year 11 claim, but you just -- you know, you just don't know. I 12 can't -- 13 COMMISSIONER LETZ: Is there a reason we use 14 the National Sheriffs Association as the -- 15 MR. FURMAN: It's been the best deal we've 16 found -- excuse me. It's been the best deal we've found. 17 JUDGE HENNEKE: In your cover letter, you 18 said you had another quote from another underwriter, but -- 19 MR. FURMAN: Yes, but you don't want to know 20 what it is. 21 JUDGE HENNEKE: What's the magnitude? You 22 said 50 percent more? 23 MR. FURMAN: For the Sheriff's Office, it was 24 a little short of $129,000. 25 (Discussion off the record.) 12-23-02 EMG 15 1 SHERIFF HIERHOLZER: One thing on the 2 revenue, Judge. On the revenue end, you know, I can't say. 3 Y'all saw what happened last year. At this point, our 4 in-county number of inmates has been running about 95 to 5 100, and we've been housing anywhere from 15 to 25 6 out-of-county's again, so we're back up to housing a lot of 7 out-of-county inmates. 8 JUDGE HENNEKE: Have you talked to Bexar 9 County at all, since they're in such problems? 10 SHERIFF HIERHOLZER: We've sent them a couple 11 deals. I think they got a better deal down at Guadalupe 12 County, and I'm not going to accept their county prisoners 13 for $20 a day. 14 JUDGE HENNEKE: Does the Texas Association of 15 Counties offer this kind of insurance at all, Jack? 16 MR. FURMAN: Yes, they do. They offer it 17 through Scottsdale. I tried to go to Scottsdale and 18 couldn't get to it, because -- because the broker I was 19 using -- or the broker has an exclusive with TAC, so they 20 write it through Scottsdale Insurance Company out of 21 Arizona. 22 JUDGE HENNEKE: Okay. 23 MR. TOMLINSON: You might -- one problem with 24 this is the -- there's not a very large market for law 25 enforcement liability insurance. 12-23-02 EMG 16 1 MR. FURMAN: No. And, unfortunately, when 2 you -- when you take better than 80 percent loss ratio to 3 them, they don't get out a sharp pencil. 4 SHERIFF HIERHOLZER: Where does that 5 80 percent loss ratio come from? Attorney fees? Or -- 6 MR. FURMAN: Well -- 7 SHERIFF HIERHOLZER: -- what is that? 8 MR. FURMAN: Yes. Yes, it is. 9 JUDGE HENNEKE: If you have three suits, and 10 they're costing you an average of, you know, $20,000 a year, 11 that -- that's hitting your premium right there. 12 SHERIFF HIERHOLZER: So, it's not necessarily 13 a loss in a lawsuit, but it's a loss because of the attorney 14 fees to defend the lawsuit. 15 MR. FURMAN: That's correct. That's correct. 16 MR. TOMLINSON: Exactly right. 17 MR. FURMAN: All of that goes into the 18 adjusting expenses, if you will. All of that goes into loss 19 ratio compilation. 20 COMMISSIONER LETZ: The underwriter wants to 21 try to settle it, which makes it higher the next year. 22 SHERIFF HIERHOLZER: Yeah. 23 MR. FURMAN: Yeah. I don't think that that's 24 intentional. I think the reason they settle those things, 25 Mr. Letz, is to make them go away, without -- because I 12-23-02 EMG 17 1 don't think that they think far enough ahead to say, if we 2 pay this, we can raise the rates. 3 SHERIFF HIERHOLZER: You know, when you 4 settle those like that -- I can recall going back, not when 5 Frances was even Sheriff; before her. There was a lawsuit 6 filed on an inmate that the City brought into the jail, in 7 this jail. And the lawsuit named me in the lawsuit, and I 8 was on vacation; wasn't even here, and they settled that 9 lawsuit with that inmate, claiming that I had abused that 10 inmate, when I was even on vacation. 11 MR. FURMAN: That was before my time, folks. 12 SHERIFF HIERHOLZER: And, in reality, that's 13 what hurts the officer's feelings, too, because it -- you 14 know, it hurt me. I said, "What are you doing, settling a 15 lawsuit when I wasn't even around?" But they settled it 16 for, like, $5,000 just to get rid of it. And it's just 17 devastating. Anyway, I don't like to see them do that. 18 JUDGE HENNEKE: Just an aside; that's why 19 this Court and future courts should never settle a lawsuit 20 unless you have the terms fully explained to you, to your 21 approval. The -- the opinion of the District -- County 22 Attorney that he has the ability to settle lawsuits naming 23 Commissioners Court is hooey, because you guys are named in 24 that as having been derelict in duty. If you settle it, 25 unless you pay real close attention to the terms of that 12-23-02 EMG 18 1 settlement, you don't know you've just admitted to being 2 derelict in duty or not for a small sum of money. Okay, 3 guys. It's your turn. 4 COMMISSIONER LETZ: You make the motion. 5 COMMISSIONER BALDWIN: Well, I can't figure 6 out what the motion is. Are we declaring an emergency and 7 going into the reserves? 8 JUDGE HENNEKE: Not at this time. This is -- 9 this would simply be to authorize whatever form of liability 10 policy you want. Then Tommy would have to find the money 11 and -- 12 COMMISSIONER BALDWIN: Come back at a later 13 time? 14 MR. TOMLINSON: And we'll -- I will -- when 15 you decide, we'll know what the amount is. And we will have 16 to make a payment before -- before the next court date. 17 MR. FURMAN: I don't think you'll have to pay 18 us before the next court date. Y'all will meet sometime in 19 January? 20 MR. TOMLINSON: Right, it will be 21 January 13th. 22 MR. FURMAN: So, that would be plenty of 23 time. 24 MR. TOMLINSON: Okay. All right. Well, as 25 long as -- as long as I don't need a hand check to pay this 12-23-02 EMG 19 1 before -- before that date, then we're okay. 2 COMMISSIONER BALDWIN: Do we do these 3 separate, Sheriff's Department and juvenile? 4 JUDGE HENNEKE: You can do them in one 5 motion. 6 COMMISSIONER BALDWIN: Do them in one motion. 7 And, Jack, you're recommending that we stay with the same 8 schedule; i.e., $1 million/$2 million? 9 MR. FURMAN: I'm not going to recommend 10 limits to you, Mr. Baldwin. 11 COMMISSIONER BALDWIN: What are you going to 12 recommend to us? 13 MR. FURMAN: But I'm going to recommend the 14 occurrence form to you. The $1 million/$2 million has been 15 more than adequate heretofore. Let me put it that way. 16 COMMISSIONER BALDWIN: That's the schedule 17 we've been on for -- 18 MR. FURMAN: That's the schedule you've been 19 on for quite a few years. 20 COMMISSIONER BALDWIN: Okay. That would be 21 my motion. Occurrence form, the first line in that. 22 COMMISSIONER LETZ: Second. 23 JUDGE HENNEKE: Motion by Commissioner 24 Baldwin, second by Commissioner Letz, that the Court 25 authorize renewal of the law enforcement liability policy 12-23-02 EMG 20 1 for Kerr County with the National Sheriff's Association, 2 occurrence form, with a deductible of $1 million -- limit of 3 $1 million/$2 million, and a deductible of $10,000 for both 4 the Sheriff's Department and the Detention Center. 5 COMMISSIONER BALDWIN: That's correct. 6 JUDGE HENNEKE: Any questions or comments? 7 If not, all in favor, raise your right hand. 8 (The motion carried by unanimous vote.) 9 JUDGE HENNEKE: All opposed. 10 (No response.) 11 JUDGE HENNEKE: Motion carries. 12 MR. FURMAN: Thank you, gentlemen. 13 JUDGE HENNEKE: Two in one day. We're 14 adjourned. 15 (Commissioners Court adjourned at 1:24 p.m.) 16 - - - - - - - - - - 17 18 19 20 21 22 23 24 25 12-23-02 EMG 21 1 STATE OF TEXAS | 2 COUNTY OF KERR | 3 The above and foregoing is a true and complete 4 transcription of my stenotype notes taken in my capacity as 5 County Clerk of the Commissioners Court of Kerr County, 6 Texas, at the time and place heretofore set forth. 7 DATED at Kerrville, Texas, this 31st day of December, 8 2002. 9 10 11 JANNETT PIEPER, Kerr County Clerk 12 BY: _________________________________ Kathy Banik, Deputy County Clerk 13 Certified Shorthand Reporter 14 15 16 17 18 19 20 21 22 23 24 25 12-23-02 EMG