WE ALL LEARNED FROM THE MOVIE FOREST GUMP: "Life is like a box of chocolates. You never know what you'll get." In the same way, insurance policies can be, but shouldn't be, full of surprises when a county has a claim. By devoting some time to understanding what's in a county's insurance coverage contract, officials can know when to expect a cherry, or a nut.

The Texas Association of Counties' field representatives frequently hear the statement, "I hate insurance" from our members, probably because insurance is not only confusing but expensive and sales pitches often seem contradictory. It is easy to have rampant confusion set in anytime the county is faced with making a decision based solely on what the salesperson presents in his or her pitch.

Let's resolve some of this confusion by answering a few frequently asked questions about public official liability insurance, for example.

WHAT IS IT?
Public official insurance is a form of professional liability insurance or errors and omissions coverage specifically designed to treat some of the exposures facing public officials. Simply put, this coverage provides payments for legal defense and any claims that result when county officials get sued because somebody thinks they screwed up while acting in their official capacity.

WHAT DOES IT COVER?
Its intent is to pay on behalf of the insured the defense costs and damages for suits alleging wrongful acts by public officials. Wrongful acts is a broadly defined term in most policies usually including error or misstatement, neglect or breach of duty, discrimination, violation of civil rights and employee hiring and firing, just to name a few.

WHO IS COVERED?
In most cases the named insured include:

• the county (or other named insured entity); and
• public officials, employees, volunteers of the county (while acting within the scope of their official capacity) and members of commissions, boards or other units operating under the jurisdiction of the county.

WHAT IS NOT COVERED?
Exclusions usually include bodily injury, sickness, assault or battery, disease or death, fraud, generally all things of a law enforcement nature (i.e. false arrest, excessive use of force, improper service of process, etc.), criminal acts, pollution and when one insured sues another insured. These exclusions appear here because they are usually covered in another type of insurance policy. There may be other exclusions as well, so this is where spending time reading your policy becomes important..

WHEN DOES COVERAGE APPLY?
These policies are usually written on a "claims made" form, which means that the wrongful act must have happened on or after the "Retro Active Date" RAD (normally the first day you buy a claims made policy) and the claim must be filed during the policy period. Can you taste the chocolate? Don't let this language throw you off. The above diagram may help:

If the wrongful act happened before the RAD it doesn't matter when you turn the claim in, there is no coverage. If the wrongful act happened after the RAD but the claim gets filed after the policy expires – still no coverage unless the renewal is a "claims made" policy and the RAD is before the act. Solution: make sure your policy has a RAD dated way back in the past and always renew a "claims made" with a "claims made" policy in the same company if possible.

DOESN'T MY BOND DO THE SAME THING FOR ME?
No.This is not a bond for faithful performance. Rather it is a liability policy to provide legal defense and pay damages for suits brought against public officials. A Public Official Bond is usually written for an amount far less than a Public Official Liability policy.

HOW MUCH SHOULD I BUY?
That is the $64,000 question. These limits for this type of policy are expressed as a "per claim" and "aggregate" amount. This means that any one claim is subject to a limit regardless of how many insureds or claimants are involved in it, and the policy will only pay out until its total limit is used up for several claims.

These settlements are rare, but when they do happen, they are large enough to make front page headlines. Officials should consider several aspects, including the value of an individual's or county's reputation. Also, if a successful plaintiff is entitled to one of these big settlements, where does the county want the money to come from?

ARE ATTORNEYS FEES A PART OF MY LIMIT OR ARE THEY SEPARATE?
It depends on how the policy is written. An official can usually determine this by reading the section titled Defense, Definitions or sometimes in an Endorsement. If your contract does not state where defense costs are allocated, ask the county's provider and get the answer in writing. This policy is the county's best source for funding a successful defense if and when a suit is filed. Make sure the legal costs don't exceed the policy's limits before the conclusion of this usually lengthy and expensive trial.

WHY DO THE POLICIES VARY IN COST SO MUCH?
The old saying, "you usually get what you pay for" applies to this question. The uninformed buyer may select the lowest cost policy only to find out later about its advanced RAD, lower limit (which included attorney fees) or an exclusion for coverage such as, employment practices or discrimination claims. The time to find those limitation is before the county buys. This is not to say that the highest cost policy is the best nor the lowest cost policy is deficient. Officials should just know what questions to ask and make sure they clearly understand the answer.

CONCLUSION:
Insurance is expensive and enigmatic but critically necessary to survive in this era of litigious entitlement. Officials can confidently purchase this product by just knowing the right questions to ask and not giving up until they are satisfied with the answer. Be sure to ask for a specimen policy to read before the decision is made and always deal with a broker the county is familiar with.

Do the homework first to eliminate the surprise (cherry or nut?) later.