Spirit Lake lost its employment practices liability insurance coverage Oct. 1, and is waiting on a quote to be finalized with another insurer to cover the lapse until the mayor can appeal to have the insurance reinstated.

The Idaho Counties Risk Management Program notified the city in a letter of the drop, and other reductions.

“The (ICRMP) Board of Trustees decision to implement these changes is the result of numerous factors including adverse claim development and increasing risk exposures,” wrote ICRMP Executive Director Timothy Osborne in the letter.

The Society for Human Resources Management, or SHRM, describes employment practice liability insurance on its website as coverage designed to protect against loss incurred in litigating and settling wrongful employment practices liability claims.

"It is typically structured as gap insurance for the company. It provides protection against lawsuits such as discrimination, breach of contract, and wrongful discharge suits, which usually are not covered by general business liability insurance," said the organization on shrm.org.

The Spirit Lake City Council approved a supplemental insurance policy through Indian Harbor Insurance during a meeting Oct. 17, but that coverage hasn’t started yet, City Clerk Michelle Wharton said.

Indian Harbor is confirming the quote for coverage is still valid after the council voted to move forward, she said.  

ICRMP will be the city’s insurance provider for all other areas, despite reductions.

In the letter the ICRMP board also reduced the city's indemnification limit from $3 million to $500,000 per claim. That includes auto, general, law enforcement, errors, employee benefit and sexual molestation liabilities.

The aggregate liability indemnification limit, or total maximum payout for a year, was also reduced from $5 million to $2 million.

“You're not the only entity in the area that they’ve done this to,” City Attorney Chris Gabbert said to the city council during the meeting. “And that decision is being appealed by the mayor back to the ICRMP Board. We’re trying to convince them that this is an erroneous decision, however that’s not happening until late October. In the meantime there is no coverage for this exposure right now.”

The drop in insurance coverage left the board with a few options: approve a supplemental policy, lose coverage, or go out to bid for a new insurance company and risk a lapse in coverage.

“My thoughts would be to move forward with the Indian Harbor quote,” Councilman Kenny Gross said. “It seems quite cost effective. And then reconsider it in a year’s time with the hope we can get back to ICRMP.”

The decision to select Indian Harbor over competing bids from Redman Insurance and Allied World Specialty was based on cost-effectiveness.

Employment practices liability insurance will cost the city $6,700 for the year.

“My recommendation would obviously be reapplying to ICRMP and the mayor is going to be discussing the decision with them,” Gabbert said. “And obviously in the future trying to get that coverage back is the cheapest option in the long run.”