We're taking a brief break from Florida's insurance woes. The sinkhole issue is being hotly debated by legislators and newspaper editorial staffs. The solvency of Citizens is at risk. Coastal communities will be paying exorbitant rates for homeowner insurance if something doesn't change soon.... We're heading north to look at a problem that's arisen between a county government and its insurer.
After a miniature train in a South Carolina county park derailed, leaving one boy dead and almost 30 people with minor to severe injuries, the local government came up with a plan to help the victims and their families with medical costs. A state law limits government liability to $600,000 total -- all claims, combined.
The county proposed a plan: The county and the governor's office to donate $1 million each to a fund that would help the victims with their co-pays and deductibles. The state insurance authority, though, put the kibosh on the fund.
A county councilmember said it was the South Carolina Insurance Reserve Fund's opinion that the planned relief fund would make the county uninsurable. It would also make taxpayers liable for millions of dollars that the statute now shields them from.
Floridians know about being uninsurable. Generally what happens is this: The policyholder's claims grossly exceed what the insurer has collected in premiums. The insurance company is losing too much money to keep insuring the policyholder, so the policy is dropped. Insurance is all about risk, and if there's a risk the insurer will lose a lot of money, the policyholder is out of luck -- and uninsurable, because no other insurance company will want to take on that risk, either.
The South Carolina government released a series of emails relating to the train accident and its aftermath to a local newspaper. According to the paper's reports, the emails show that officials were eager to help the victims and tried to find a way around the $600,000 limit. When the plan failed, the emails took on a different tone: distinctly disappointed that they were trying to do the right thing but were, to use one official's term, handcuffed.
To be continued.
Source: Insurance Journal, "South Carolina Nixed Insurance for Train Victims Over Liability Fear," 04/26/11