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 Frustrated Town Council Seeking New Insurer

June 24, 2009 - Continuing frustration with the town's insurer has resulted in the Knightstown Town Council directing the town's clerk-treasurer to look for a new one.

At its June 18 regular monthly meeting, the council's five members voted unanimously to direct Clerk-Treasurer Judy Haines to seek bids for other potential providers for the town's insurance coverage. Two lingering issues with the current insurer, Governmental Interinsurance Exchange, prompted the action.

First, council members are upset that GIE wants the town to pay a $2,500 deductible for outside legal advice GIE sought without the town's knowledge. While the town's attorney, Gregg Morelock, told the council that GIE didn't need to get the town's approval under the terms of the policy, he also said he'd never seen an insurance provider take this action before a lawsuit has even been filed.

GIE had hired outside legal counsel to research whether a former Knightstown Police Department officer's threatened legal claim, set forth in a tort claim notice filed with the town, would have been covered under the town's policy. Council Vice President Terry Guerin said he thought the coverage issue was one GIE could have determined without outside council and that, since the outside attorney was hired without the town's knowledge, the town shouldn't pay the $2,500.

"They didn't have to have your permission to seek legal counsel," Morelock said. However, repeating what he had first told the council in May, he said he thought it was "a little out of the ordinary" for GIE to seek outside legal advice on the coverage issue before a lawsuit had been filed.

Morelock suggested that council members speak to the town's local insurance agent, Chad Leakey of Leakey Insurance, about this matter. "Those are the kinds of things I would expect my agent to do for me," he said.

The second lingering issue the council has with GIE is related to attorney fees and related costs the town and GIE owe The Banner. After the newspaper won a landmark public records lawsuit filed in 2004 to find out the terms of a settlement that ended a former police dispatcher's civil rights lawsuit against the town and KPD, a Henry County judge had ordered the town and GIE to pay The Banner $55,212.46.

The judgment against the town and GIE holds them both jointly and severally liable for what's owed to The Banner. Initially entered as a $67,612.46 judgment in March 2007, Henry Circuit Court Judge Mary Willis reduced the amount to $55,212,46 last August following an appeal.

In March, the council voted to pay half the judgment and interest going back to the date of the amended judgment issued in August 2008. The town cut a check and sent it to GIE to forward to The Banner with the insurer's portion.

The Banner took the position that the interest owed by the town and GIE should actually go back to March 2007. GIE's attorney, Morelock said last week, now agrees that the interest should go back to the earlier date, and the town is being asked to pay an additional $3,623.95 in interest for their share.

Guerin said he agreed that the town does owe additional interest going back to the date of the original March 2007 judgment. However, he said he thought any additional interest that accrued after the town cut its check this March is the result of delays caused by GIE and should be paid by the insurer.

Morelock said he thought Guerin's suggestion was a good compromise and that GIE might be agreeable to it. "You want to put this behind you," he said. "You want to get this done."

After expressing his own concern over the delay in resolving this issue, council member Clyde South made a four-part motion. First, he said he wanted Haines to be directed to seek bids for a new insurer, and he wanted to contact Leakey to advise him of what the council's expectations are with respect to his role as the town's insurance agent.

The third part of South's motion incorporated Guerin's suggestion that the town not pay any additional insurance that accrued after the date the town cut and sent its first check to GIE in March. The motion's final component was to send a letter to GIE telling them the council is "absolutely fed up with their performance and ... (is) looking for another insurance company."

Council member Bob Weber said the council might not want to levy any threats about switching insurers until everything has been settled. South said Weber had a right to his opinion, adding, "It's not a threat if you do it."

Council President Valerie Trump said she thought GIE's attorney, Steven Pearson, should have researched the issue of when the interest began accruing before a dispute arose. "Logically, to me," she said, "that would have been part of his job."

Council member Steve Nelson seconded South's motion. Before a vote was taken, however, Guerin and Weber expressed reservations. Guerin told South he agreed "in spirit" with what he wanted to do. However, he said thought that "mechanistically," South's motion had been "a mess." Weber also said he agreed with what South was wanting to do. However, he said he objected to the timing.

"It should have been done a year ago," South said. He then withdrew his motion.

Nelson said he thought the council needed to move forward with Guerin's proposal to notify GIE of what portion of the additional interest the town is willing to pay. Trump suggested that someone make a motion directing Haines to seek bids for a new insurer and that GIE be notified of the town's proposal regarding the additional interest owed to The Banner.

South made a motion directing Haines to seek bids on a new insurer, which was seconded by Weber and unanimously approved. The motion did not, however, include any language about contacting GIE regarding the amount of additional interest owed.


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