Liability Claim Decisions

When a member reports a liability claim to the Trust, the Trust must determine whether the member is legally liable for the damages that are being claimed. In general, for a member to be liable for someone else’s damage, the following three conditions must be met:

1. The member must have been negligent.
2. The damages must have been caused by the member’s negligence.
3. It isn’t an area where the member is immune from liability.

A liability claim will usually be denied if the claim was not caused by the member’s negligence. There are, however, some situations in which a claim denial is not clear and other claim resolutions may be considered. In some situations, it may seem easier to make a payment to the damaged party, even though legally the member isn’t liable for that payment. The Trust, though, cannot do this because the funds the Trust uses to pay claims are public funds that are the joint property of all Trust members. The Trust has a duty to ensure those funds are paid out only when legally owed. To do otherwise would be an unauthorized use of public funds (Minn. Const. art. X, § 1).

Resolving liability claims

There’s often a good deal of judgment involved in evaluating liability claims, and members may disagree or have questions about the Trust’s evaluation and conclusion. If there are facts or information your claims adjuster isn’t aware of or issues they haven’t investigated, the member should always bring those concerns to their assigned adjuster. If questions persist, contact the adjuster’s supervisor or the Trust’s Claims Manager Darin Richardson at drichardson@lmc.org or (651) 281-1283. They will review the claim to ensure the correct conclusion was reached.

Member’s authority to make final settlement decisions

The Trust has the legal authority to settle a covered liability claim on a member’s behalf. However, because the Trust is a cooperative organization, it strives to keep members informed of how a case is developing and whether a settlement or a claim denial is being considered. The Trust always welcomes members’ comments, suggestions, and opinions on how a claim should be approached and whether a settlement should be considered or a claim should be denied.

Sometimes, situations arise where the Trust believes a liability claim should be settled, but the member strongly disagrees. The “consent-to-settle” provisions of the Trust’s liability coverage would usually apply in those situations. These provisions give the member the right to review a proposed settlement before it’s finalized and make the final decision on whether the settlement will be offered. However, the consent-to-settle provisions do not apply to claims handled under the Trust’s land use or special risk litigation coverages, wherein decisions are made mutually between the Trust and the member.

Procedures to make final settlement decisions

To exercise the rights of the consent-to-settle provisions contained in the Trust’s liability coverage agreement, the member needs to follow the procedures spelled out in the Trust’s liability coverage document and be aware of the financial risks involved. Under these procedural requirements, the member:

• Must provide notice to the Trust before settlement. To exercise the right to review and approve or disapprove a settlement on a liability claim, the member must give notice to the Trust before it has offered or made a settlement. A notice must be given for each specific claim on which the member wishes to exercise its consent-to-settle rights. The member must also designate an individual who is authorized to approve or disapprove a proposed settlement on the member’s behalf, and it must include the name, address, and phone number of that individual. Unless and until the member gives notice, the Trust has the authority to settle the claim if appropriate.
• Must review settlement and be aware of deadlines to settle. When the member has given notice to the Trust that a case may not be settled without its permission, the Trust will contact the member’s designated individual to inform them of the terms and conditions of any proposed settlement on that claim. The member has 14 days to disapprove or approve the proposed settlement (in certain situations, this period can be extended or shortened if agreed to by both parties). If the member does not notify the Trust within 14 days that it has disapproved the settlement, the member is deemed to have consented to the settlement, and the Trust is authorized to proceed with the settlement if appropriate.
• Must be aware of three financial risks of choosing to veto a proposed settlement.
  • First, if a member disapproves a proposed settlement, there’s the risk the cost of the case will turn out to be greater than the proposed settlement. If the ultimate total cost for damages and defense costs on the claim is greater than the proposed settlement plus the defense costs incurred to that date, the member is responsible for the difference.
  • Second, if the member’s refusal to consent to a proposed settlement results in a further claim for damages or action seeking penalties against the Trust, the member must defend and indemnify the Trust for that claim, defend itself against any such claims or actions, and be responsible for any damages or penalties awarded against the member.
  • Third, in situations where Medicare is involved and the member does not consent to a settlement, the member must cooperate with the Trust so it can ensure Medicare’s financial interests are protected, as required by federal regulations. Members that do not consent to settlement must defend and indemnify the Trust for Medicare claims that result.
• May veto settlement after exercising consent-to-settle rights. If a member vetoes the proposed settlement after exercising its consent-to-settle right, there are two ways to proceed:
  • The Trust can make payment to the member equal to the amount of the proposed settlement minus any applicable deductible. At this point, it becomes the member’s duty to defend both itself and any other covered party.
  • The Trust can continue defending and managing the claim, but if costs turn out greater than what it could have been settled for, the member must reimburse the Trust for the excess cost.