Lake Elmo insurance deductible rockets to $200,000

Six employees at Lake Elmo City Hall have quit since March. At least three have publicly cited a hostile work environment as a factor. (Gazette staff photo by Alicia Lebens)

The League of Minnesota Cities Insurance Trust has found that incivility on the Lake Elmo City Council and an inability to make progress toward improvement is too risky to continue to insure without increasing the city’s claim deductible.

The board voted unanimously Sept. 7 to approve an increase in the deductible from $500 per claim to $200,000 per claim. The change doesn’t apply to physical injury or property damage claims.

Dan Greensweig, the assistant director of the League of Minnesota Cities Insurance Trust (LMCIT), has worked with the city for the past year after incivility on the council led to high staff turnover, long and unproductive meetings, dysfunction between council members and city staff and trouble working with other government agencies.

Greensweig presented a report Sept. 7 outlining the issues with the Lake Elmo City Council. Using articles written by The Gazette and other media, and drawing on LMCIT staff interactions with the city, he created a timeline of incidents that have contributed to the council’s dysfunction and attempts by LMCIT staff to help.

In a letter to the LMCIT board, Julie Fliflet of the Lake Elmo City Council objected to using the articles as evidence. She said the board should look instead at the low cost of insurance claims filed by the city.

“Newspaper reporting is driven by a desire and need to sell papers,” Fliflet contended. “Most of the reporting on Lake Elmo tends to be sensationalized and inaccurate. Most often the reporting adds to the drama, sensationalizes even small issues, continues the dysfunction and stirs up more controversy. Claims should be the true indicator of problems.”

In his report, Greensweig stated that “there is some controversy about the extent to which articles have taken things out of context or not completely accurate.” But Greensweig concluded that “a review of video recordings of council meetings suggest the articles accurately capture the tone of council meetings and interactions.”

Greensweig told the board that so far it has not seen a high number of claims from Lake Elmo. From January 2010 through July 2016, the city has losses of $232,073 and has paid premiums of $445,613. Imposing the increase in the deductible now would be a philosophical shift in how the board manages risk, Greensweig said. In the past when incivility led to lawsuits, the LMCIT paid out millions of dollars in claims before imposing a deductible increase. By using past knowledge of how incivility now seen in Lake Elmo could progress, the board could mitigate risk to the other members of the trust before “horrible expense,” Greensweig said.

“To wait for a claim is not responsible,” said board member Joel Hanson, the city administrator of Little Canada.

Board chair Todd Prafke said this isn’t the first time incivility has been a problem in Lake Elmo, but it is the first time the trust would take action.

“Lake Elmo has been a challenging culture for a long time,” Prafke said. “It will take a significant effort to change.”

According to Greensweig’s report, LMCIT has committed between 75 and 100 hours of staff time and about $8,000 on professional conflict mediators to help Lake Elmo council members and staff work through some of the issues of incivility. The mediators have since ceased actions in the city due to a lack of improvement by the council. Rhonda Pownell, a LMCIT board member and a council member in Northfield, said she was concerned with the amount of resources the trust has spent on Lake Elmo.

“I can’t name a time we have given this much to one city,” Pownell said. “It is not sustainable.”

Board member D. Love, a council member in Centerville, said the board needed to bypass risk that is being caused by Lake Elmo that could have an impact on other members of the trust.

“As council members, we have a duty to civility,” Love said.

Greensweig had recommended the board increase the deductible to $250,000 and be reviewed in January of 2018. Instead, the board chose to set the deductible at $200,000 and allow the board to review the situation in Lake Elmo in June 2017, due to the potential of change on the council as a result of the upcoming election. The change will take affect in October.

Representing the city at the meeting was city attorney Sarah Sonsalla, city administrator Kristina Handt and mayor Mike Pearson.

“While I was hopeful there would be no change, I understand their reasoning,” Pearson said after the decision. “It was not unexpected.”

Should the city need to file a claim in the future, the deductible would be paid using tax dollars. While Pearson said he hopes there will not be a need to file a claim, there is still concern.

“I think it is a reasonable thing to be concerned about — we all should be and the residents should be as well,” Pearson said. “It’s a big deal, it’s a big number and our budget would be severely impacted by it.”

Contact Alicia Lebens at [email protected]

  • Renard

    By responding the way she does, Fliflet proves the LMCIT’s point.

  • Alex Mundy

    Fliflet’s biased view of newspaper reporting is misguided. The newspaper business is driven by a desire and need to sell papers, but reporting provides invaluable information, investigation, analysis and community knowledge, particularly in the coverage of local affairs. She should offer proof of her claim that “most of the reporting on Lake Elmo tends to be sensationalized and inaccurate.” The videos of council meetings don’t lie and neither does the reporting.