Ten months into the new year have left the Lake Elmo city hall with high levels of staff turnover and public fighting among council members. Incivility, however, could have a real financial price tag if the city’s liability insurance group decides the cost of defending and settling claims for Lake Elmo becomes too high.
The League of Minnesota Cities Insurance Trust is a member-owned cooperative that provides property, liability, workers’ compensation and employee benefit coverage to Minnesota cities, including Lake Elmo. Members contribute premiums to a jointly-owned fund rather than paying premiums to buy insurance from a private insurance company. The funds are used to pay for members’ claims, losses and expenses.
The trust is managed by a board of directors who ensure that risks to the financial well-being of the trust are managed. One of the rarest but most harmful threats to the insurance trust are cities that require more payouts for lawsuits than they pay in with premiums.
“What that means is that in a self-insurance pool, all members are affected by one city’s losses,” said Dan Greensweig, assistant director of the League of Minnesota Insurance Trust.
Greensweig met with the Lake Elmo City Council during a workshop Oct. 13 to talk about ways council members can improve their interactions with each other, with staff and with the public to avoid expensive lawsuits and settlements. If the city doesn’t take steps to improve the actions and behaviors that the members of the insurance trust view as threats, the governing board could revoke Lake Elmo’s liability coverage.
After spending more than $1 million in 2008 to defend and pay out lawsuits in Maplewood, the League of Minnesota Cities Insurance Trust voted to renew the city’s insurance policies with higher premiums and deductible. Instead of a deductible of $50,000 per claim, the trust increased the city’s deductible to $200,000 per claim.
In 2009, the trust’s board voted to eliminated insurance coverage to the city of Greenfield following $800,000 in payouts due to claims.
Finding coverage from a different insurance policy can cost 10 times more than what is offered by the insurance trust.
Both Maplewood and Greenfield were cited by Greensweig in his presentation to the Lake Elmo council.
“We don’t use a set checklist to decide when a city should be considered, when to stop insuring a city,” Greensweig said in a later interview. “It’s kind of like a healthy family — you can’t always list the factors that make up a healthy family, but you know it when you see it.”
Even cities that do everything correctly and have civility at the council table can have lawsuits, Greensweig told the Lake Elmo council. The league isn’t interested in a particular policy or a particular dollar figure for claims payouts.
“When a council operates outside of the norms, it raises concerns,” Greensweig said. “We need to protect the other members.”
Greensweig told the council he looks at five factors when considering good governance: how decisions are being made and if the city is following data practices requirements; the relationships between council members; the relationship between staff and the council; the council’s relationship with the public; and how a city interacts with other government agencies.
“The media looks for interesting stories, and conflict is an interesting story,” Greensweig said. “Crowds show up, and the normal business of the city does not get done.”
Greensweig said his impression of Lake Elmo is that it has problems related to processes during city council meetings, and offered the services of the League of Minnesota Cities to help draft a policy to help with the creating of an agenda and the management of the meetings. In the future, Greensweig suggested the city meet to discuss the council’s interactions with staff.
“We want our cities to succeed, whatever is right for you,” Greensweig said.
The council agreed to work on drafting a policy.
“I think we can understand the gravity of the situation,” Mayor Mike Pearson said.
In a later interview, Greensweig was optimistic about the future of Lake Elmo, because they have committed to mediation and policy changes.
“By being willing to meet and talk about some concerns, it was a step in the right direction,” Greensweig said.
Contact Alicia Lebens at [email protected]