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County: ‘We’ll take care of victims.’ State: ‘No, you won’t.’

Wed Apr 27th, 2011 on     Insurance Claims,    

While the Florida General Assembly continues its debate over sinkhole coverage, rate increases and property insurance coverage in general — not to mention changing the name of Citizens Insurance to Taxpayer-Funded Property Insurance Corporation — a group of community leaders are trying to figure out a way to help the victims of an accident in a county park.

The accident occurred on March 19, the first day of the season for a public favorite, the miniature train. Something went wrong, though, as the train went around the track. The cars derailed, and the train and passengers hurtled down a rocky embankment. One 6-year-old boy was killed, and 28 children and adults were injured. Many of the passengers that day were part of a church group on a family outing. The boy who died was the pastor’s son.

The cause of the crash has yet to be determined, but liability is barely an issue. The park is in South Carolina, and South Carolina law imposes a $600,000 limit on any claims against a state, county or municipality. That means that the 28 people must share that $600,000 to cover all of their medical expenses associated with the accident.

The county and the governor’s office responded with compassion and action. Each pledged $1 million to be put in a fund that would pay the victims’ medical bills. One county official wrote in an email that he believed state and local leaders should meet with the victims and their families, to reassure them that the government would take care of their co-pays and deductibles. “This is our responsibility,” he wrote.

Just as government representatives were preparing for a news conference, the state’s Insurance Reserve Fund stepped in. The plan died then and there.

The Insurance Reserve Fund insures government entities, including counties. According to its website, the agency is part of the state’s Budget and Reserve Board. Its mission is “to provide insurance specifically designed to meet the needs of governmental entities at the lowest possible cost.” The IRF operates like an insurance company, the site continues, setting rates and collecting premiums and paying claims “in accordance with the terms and conditions of the insurance policies it has issued.”

The IRF differs from regular insurance companies in some important ways. According to the website, the IRF has no agents, brokers, or advertising; nor does the IRF actively solicit accounts. The site continues:

The lack of a profit motive and the lack of acquisition expenses such as agents’ commissions, along with the use of the investment income in rate determination allows the Insurance Reserve Fund to maintain the lowest possible rate structure.

With no profit motive and low rates, why would the IRF hit the brakes on a plan to help the many victims of an accident on government property?

Continued in our next post.

Source: Insurance Journal, “South Carolina Nixed Insurance for Train Victims Over Liability Fear,” 04/26/11

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