The last month has been a particularly brutal one for the county of Humboldt's liability fund, which has hemorrhaged more than $670,000 in a settlement, attorney fees and an award for damages since May 10.
The payouts stem from three separate cases, all years in the making, and stand as a stark reminder in a time of tight budgets that a single mistake — whether it be a misguided policy or an unsafe turn in a county vehicle — can have large financial reverberations. And, the cases underscore that while the county's insurance policy is a much needed protection from financial catastrophe, it is far from a catchall safeguard of the county's coffers.
The first in the recent trio of budget gashes came on May 10, when the Board of Supervisors approved a $250,000 settlement stemming from a fatal car accident two years earlier involving a county employee. The accident itself, in addition to being devastating for all involved, is the stuff of nightmares for government administrators: On Jan. 3, 2014, a county employee driving a county truck on county business was heading southbound on Avenue of the Giants when, for unknown reasons, he made a left turn directly into the path of a Toyota Corolla driven by 26-year-old Jaime Wheeler. Wheeler's passenger, Jimmy Lincks Jr., died several days later of injuries that appeared to be sustained in the crash.
Wheeler and Lincks' son, Jimmy Lincks III, filed a wrongful death lawsuit a short time later, alleging that the crash was negligently caused by the county employee. The county denied the allegations, but commenced settlement talks.
Cases like these are precisely why government agencies have insurance. They can be devastating financially — consider the $1.6 million settlement the county reached over a 2013 fatal crash involving a parks employee and a cyclist that has the county mulling closing some parks. Back in 2014, the Board of Supervisors opted to pay higher premiums on its insurance policy in exchange for reducing its retention fee, which is akin to the deductible on your car insurance, from $500,000 to $100,000. That means if the county settles a wrongful death case for $1 million, it would be on the hook for $100,000 while the insurance pool would cover the other $900,000. But that change doesn't apply retroactively, meaning anything filed against the county in fiscal years 2012-2013 and 2013-2014 is still subject to the $500,000 retention fee. (Prior to 2012-2013, the retention fee was $150,000.)
That left the county to pay out the $250,000 settlement to Lincks III and Wheeler on its own. The money came out of the county's liability fund, which is part of its risk management budget that was given $2.73 million this fiscal year. According to county spokesperson Sean Quincey, the liability fund uses an actuarial formula that looks at each county department, taking into account recent losses and inherent risk (the sheriff's department, for instance, carries a lot of risk because it has many employees, most of whom carry guns and drive vehicles) to determine each department's contribution to the liability fund.
But the liability fund isn't just for payouts. Quincey said it's also used to pay investigators to vet claims and other expenses associated with lawsuits brought against the county, as well as to pay the county's insurance premiums.
It might be surprising for some to learn that while the county's insurance policy covers wrongful death and personal injury cases, it largely doesn't cover blunders. Take the case of former county employee Steve Hughes, who held a number of management positions in the Department of Health and Human Services until he left county employment in 2011. A year earlier, Hughes had been passed over for a promotion in favor of a less-qualified woman. Hughes sued, alleging he and other men in the female-dominated Employment Training Division were being discriminated against because they were males.
A jury ultimately agreed, awarding Hughes $60,000 in lost wages and $125,000 in emotional distress damages, a combined $185,000 hit to the county. In this case, according to Quincey, the county actually spent more than $125,000 defending itself, eating up its deductible, so the entire award was covered by insurance.
As Hughes' case suggests, governmental missteps can be pricey. Perhaps the best recent example of this is the "shaded parcels" lawsuit brought against the county by the Humboldt Coalition for Property Rights in 2012.
First, a brief background: The term "shaded parcels" refers to parcels in Humboldt County that may have been created illegally, and stems from the county's decades-long practice of using a pencil to shade in such parcels on the county's official parcel-map books, emblazoning them with a kind of "scarlet letter." Some of the parcels that wound up shaded were or are, in fact, illegal, having been created through subdivision that didn't go through the proper channels and processes. Others, however, were or are perfectly legal, their uncertain status stemming from a clerical error or some other mishap. And some fall into some shade of gray, their exact legal status still shrouded in mystery.
HumCPR felt this shading was abhorrent and sued to halt it, likening the practice of deeming a parcel shaded and putting the onus on the landowner to prove its legality to extortion. The county hired an outside attorney to handle the case and spent more than $88,000 in litigation, according to Quincey, though it's not entirely clear how much of that came from the county's liability fund.
Last fall, the county and HumCPR announced that they'd settled the lawsuit, reaching an agreement that both sides found acceptable. The county had long since stopped "shading" parcels, but now pledged to purge all records of the shading — including notations in internal parcel databases — save for a single publicly available list folks can check to see if a specific parcel's status is in question. Meanwhile, the planning department is continuing to work through the list — which once numbered more than 1,500 but currently lists fewer than 600 parcels — to determine the properties' legal status and advise their owners of the findings.
The impact of the settlement seems to be much in the eye of the beholder. Ask HumCPR about it, and the property rights advocacy group will say it ended an "injurious and illegal" practice at great benefit to the general public. But ask County Counsel Jeff Blanck or someone in the Planning Department, and you're likely to get more of a shrug. "From the county's perspective, it didn't change a whole lot," Blanck said, adding that — no matter what you want to call them or how you want to mark them — there are still parcels in the county with uncertain legal status, and county staff is working as quickly as it can to clear up the confusion and notify property owners of its findings.
Last month, Humboldt County Superior Court Judge Marilyn Miles shocked just about everyone watching when she ruled that not only should HumCPR get the $158,585 attorney fee reimbursement it was asking for, but also an additional almost $80,000 multiplier because HumCPR's attorneys —Timothy Needham and Bill Barnum — had incurred risk by taking the case on contingency, meaning they would only be paid for their work if their client prevailed in the case. In a press release announcing the award, HumCPR opined that Miles applied the legal-but-seldom-used multiplier in part due to the "particularly egregious acts taken by the county."
The attorney costs and fees sting the county, as the liability fund takes money directly out of the general fund, cash that could be used to address the huge and growing list of deferred road maintenance projects, purchase new equipment for the Sheriff's Office or start a housing trust fund ($238,000 could provide a lot of first and last months rent and security deposits). They sting all the more after hearing HumCPR's contention that it offered to settle this portion of the case for $75,000. (Blanck said if such an offer was made, it was well before he joined the county a little more than a year ago.)
Quincey said it's too early to tell if reducing the county's retention fee from $500,000 to $100,000 will ultimately make up the cost of a pricier premium, as none of the claims filed against the county since the change have resulted in payouts at this point. When the county voted to make that change in 2014, 5th District Supervisor Ryan Sundberg said he believed it would pencil out. "When you bring it down to $100,000, you start to shrink the risk," he said at the time.
In a sense that's true, but insurance groups have proven pretty adept at making sure increased costs accompany decreased risk. Ultimately, it seems the only way the county is really going to be able to shield itself from consistent litigation losses is to either stop making mistakes or spend for a policy that covers more than death and injury cases.