Courthouse notebook | Employee lawsuits hit Surfside Beach insurance tab

Employment-related lawsuits are having an impact on insurance costs for the town of Surfside Beach, which has seen its premiums for liability coverage jump by 37.5 percent since 2010 and could be in for another price spike in the coming year.

Meanwhile, a federal judge has recommended dismissing a pair of lawsuits filed by former police officers in North Myrtle Beach, saying the two women have not provided any evidence that their firings involved any form of discrimination on the part of the city or their supervisor, former Public Safety Director William Bailey.

The former police officers – Carol Johnson and Pamela Cooper – have 14 days to file an objection to the judge’s recommendation. Bonnie Hunt, a lawyer representing Johnson and Cooper, could not be reached for comment.

Lawsuits are among several factors that can play a role in liability insurance costs for municipalities statewide.

Surfside Beach – which recently settled a pair of lawsuits filed by former employees, including its public safety director – paid $171,045 in fiscal 2011 for liability insurance coverage through the Municipal Association of South Carolina. That compares with a premium of $124,439 in 2010.

In addition to claims, insurance costs can be impacted by policy limits and deductibles.

A more telling indication of a town’s risk level is its “experience modification factor” – a ratio assigned by insurance underwriters based on a three-year history of claims and losses. A ratio of 1.0 is considered average, with the ratio rising as the perceived risk increases. For example, a ratio of 1.2 would mean a town has 20 percent more risk than average. The ratio is capped at a low of 0.5 and a high of 2.5, according to the municipal association.

Surfside Beach’s ratio for the current fiscal year is nearly 1.82 – which means underwriters consider the town’s risk for insurance loss to be about 82 percent greater than average in South Carolina.

That is an increase over the town’s ratio of 1.1 in fiscal 2011.

Town Manager Jim Duckett said he expects the ratio and premium costs to increase over the next year. Duckett is preparing a presentation on insurance costs for the Town Council’s budget retreat on March 8, but said he is not ready to discuss the issue publicly.

In addition to tort liability, the municipal association’s insurance – called the S.C. Municipal Insurance and Risk Financing Fund – also covers property and casualty claims as well as automobile coverage. Underwriters cap tort liability claims at $75,000 and they do not include property claims when figuring a municipality’s experience modification factor. The risk factor for automobile claims is figured separately.

Surfside Beach agreed this month to pay $115,000 to Andy Christenson, the town’s former public safety director, to settle a wrongful termination lawsuit Christenson filed in 2010 after the town decided to separate its police and fire departments into two separate divisions.

The town also will pay $15,000 to Robert “Ty” Taylor, the former public works director who was fired by the Town Council on Jan. 12, 2010, after he was arrested and charged with an open container violation. Taylor filed a lawsuit against the town in January 2011 and that lawsuit was settled last month.

A third Surfside Beach employment lawsuit – filed by Lois Duffy, who alleged age discrimination as the reason for her dismissal in 2008 – was settled in October. Terms of that settlement were not available.

In North Myrtle Beach, which has been hit by at least four employment-related lawsuits filed by former police officers, the recent legal action has not yet affected insurance costs. The city is paying $386,945 this fiscal year for liability coverage through the municipal association – a nearly 4.2 percent decrease from the previous year.

Those costs could increase over the next year, however, because the city’s “experience modification factor” jumped to 1.2 this year compared to 0.91 in 2011.

“We do not see any correlation between former employee lawsuits and our experience modification factors or premiums,” said city spokesman Pat Dowling. “While North Myrtle Beach has several such lawsuits pending, none have been resolved, so they would not have an impact on our experience modification factors.”

At least two employment lawsuits appear to be nearing their end in North Myrtle Beach, with the city expected to win both cases.

In the first case, the city fired Johnson in July 2008 because city officials said she used the national crime database for personal reasons, let her 10-year-old daughter stay at the main fire station barracks while Johnson worked a second job, frequently missed work, was combative with co-workers and showed poor judgment, according to court documents.

Johnson claimed in a gender discrimination lawsuit filed in 2009 that Bailey did not discipline male public safety officers who committed similar offenses and gave male officers better assignments and promotions.

In the second case, Cooper said in a lawsuit that Bailey and the city discriminated against her because she was friends with Johnson. Cooper said her supervisors gave her substandard performance reviews after Johnson had filed a claim of discrimination against the city. North Myrtle Beach officials say Cooper received the poor reviews because of frequent errors and unexcused absences.

U.S. Magistrate Judge Thomas Rogers, in court filings last week, said neither woman has shown evidence to back up their claims. Rogers has recommended dismissing their cases in favor of the city, and a final ruling is expected next month.

The city of Myrtle Beach does not get its liability coverage through the municipal association, and its risk ratio was not available.

Myrtle Beach spokesman Mark Kruea said the city is self-insured for any claim up to $250,000 and purchases insurance that covers claims from that amount up to $1 million per occurrence or $2 million aggregate each year. The cost for that insurance is $304,302 this year – a 3.6 percent increase from fiscal 2011.

The city also buys excess liability insurance that would cover claims up to $9 million per occurrence. The cost of that coverage increased by $1 this year – to $89,346 – and has fallen by 17.1 percent since fiscal 2010.

“The city has a good safety program and loss control record, which helps keep premium costs down,” Kruea said. “We also shop around for insurance coverage every three years or so, to find the best rate and product.”

Myrtle Beach rules bar ‘Lady Liberty’

As tax season approaches, more women – and some men – dressed as Lady Liberty will be waving at passing cars along the Grand Strand’s roadways, trying to drum up business for the Liberty Tax Service chain of tax preparation shops.

Everywhere, that is, except within the Myrtle Beach city limits.

Marty Slapnik, the owner of three area Liberty Tax Service locations, said he has been trying for years to open a Myrtle Beach site but a city law forbidding “bodily gestures” as a way to solicit business has kept him out of the city. To date, Slapnik has shops in North Myrtle Beach, Carolina Forest and at The Galleria shopping center on Restaurant Row.

“We’d like to open a location, but we can’t have people dressed in a costume waving at cars,” Slapnik said, adding that when he owned a shop on U.S. 501 adjacent to the city limits a police officer came to his site and spray-painted a line that his Lady Libertys were forbidden to cross.

“He said, ‘If you cross over the line, we’ll arrest you’,” Slapnik said.

Sure enough, a violation of the city law – municipal code section 14-64 – is a misdemeanor punishable by up to 30 days in jail and a $500 fine.

Slapnik, in preparation for last year’s tax season, hired Surfside Beach lawyer Sid Connor to write a letter to the city seeking clarification of its law. In a response, City Attorney Tom Ellenburg said the city “is of the opinion that your client’s conduct is solely intended to solicit an occupant of a vehicle. … The activity proposed by your client would be a violation of the law and if observed could lead to enforcement action.”

City spokesman Kruea said some businesses might do themselves more harm than good with such marketing tactics.

“More isn’t always better,” he said. “Sometimes it might be so much that it could detract from the message.”

Kruea said there also is an aesthetic concern – the city doesn’t want a Lady Liberty, pink gorilla or six-foot-tall chicken-costumed walking billboard waving at cars on every street corner.

“You can imagine what we would look like if there were no rules to govern signage,” he said. “It would detract from the appeal of the area.”

Even the Chick-fil-A cow is banned from trying to entice customers off the street for a char-grilled sandwich.

If the spelling-challenged cow were in an enclosed area away from public view – perhaps serving ice cream for a child’s birthday party at the restaurant – that would be OK, Kruea said.

“But when the cow becomes a sign, that’s a problem.”