About Indemnifying Elected Board Members Against Lawsuits-D&O InsuranceSomervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas

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Somervell County Hospital District-Board Member Paul Harper
About Indemnifying Elected Board Members Against Lawsuits-D&O Insurance

21 March 2015 at 11:34:09 AM

Updated 3/22/2015 to clarify a misunderstanding I had from the video).

from the Somervell County Hospital District meeting 3/20/2015. Context is about the Darrell Best v Paul Harper civil lawsuit. The insurance company has reached out to say they will pay for it. There was an executive committee meeting the other day in which an indemnification agreement was voted on and signed by Chip Harrison and Paul Harper (Correction: I was mistaken, after watching the video again : the agreement does not specify a dollar amount but is for indemnification purposes; the insurance policy's deductible is at $25,000).  Ray Reynolds agrees about paying the deductible. Ray Reynolds also says he has not read the policy. 

Rough transcriopt of video chop, edited for specific parts. Watch the video yourself. 

Reynolds: Yeah, we have D&O coverage which is Directors and Officers coverage which covers board members when there is action taken against them when they're acting in their capacity as a board member. And in the lawsuit of Darrell Best vs Paul Harper, our D&O insurance company has reviewed and they have determined that they will pay for Paul Harper's legal expenses up to their policy limits which is a million. There is a $25,000 deductible related to the D&O insurance. 

Parker: Is it your opinion that if we didn't pay the $25,000, they'd go ahead and pay everything else? 

Reynolds: I don't know the answer to that. 

Parker  It is my belief that we must pay the $25,000 or they won't pay nothing. 

Reynolds: I have not asked that question and I don't know the answer to it.

Harrison: My whole entire take on this process was to wait and see what the insurance company felt like they had any liability and responsiblity to do anything and when they reached out and when they reached out and said, hey, I think this is covered by what our policy says, its just standard business for us to take care of our part ... the deductible.

Reynolds: You could certainly make a case that we are responsible, that the D&O insurance said that they're going to pay, there's a deductible associated with that. I think we can certianly make a case that we're responsible for the deductible and that we need to pay the deductible either to AIG or to the attorney

Parker: Need to do it now and get it over with, this is the second time and then we're going to talk about it a third time and all it is is doing what the insurance company requires us to do to use the insurance. 

Reynolds. I don't know the answer to that. I would accept your answer, I don't know the answer to that, I'll accept yours.

Harrosn: That's the impression I got after reading the insurance policy, that it was a formality for him to be indemnified and once they did, they would take care of it. I'm really under the impression that once we pay the 25,000 that they turn around and reimburse us.

Reynolds: I don't know the answer to that, i don't think so... but I don't know, I haven't read it yet. 

Parker: if the questoin were something like we should do or not do something, that's something that might should be considered but what this is is fulfilling the insurance company's requirement to use the insurance. 

Reynolds: I haven't read it 

Parker: Doesn't the agreement say if things fall apart, he has to pay us back?

Harrison: I believe so.

Parker: It's beyond me that we have to go through this to exercise an insurance that we're paying quite a bit for  (couldn't catch the dollar amount per year) 

Update: Note that the board voted against indemnifying Paul Harper in the April 30, 2015 meeting. The vote was 3/3, with Harper recusing himself so the motion failed to pay the $25,000. Ron Hankins took the lead on this with some utterly ridiculous statements about how if someone runs on an agenda and gets elected because of that known stated agenda, they should expect to be sued. 

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