By Frank Chmelik
This month we will look at how a port should react to a reported personal injury or property damage claim on port property and how the port should expect to interface with the potentially injured party, the port’s insurance broker, the port’s insurance carrier and the insurance company appointed lawyer that will defend the port.
Sooner or later most ports will receive a report of an “injury incident” or a “property damage incident” on port property or involving a port vehicle. The most common injury scenario is a “slip and fall” on the docks or other public place. Property damage can include such things as overspray of vehicles by a port tenant or a collision between a port vehicle and someone else. Every incident does not result in a “claim” for damages. However, keep in mind that a person has three years from the date of the injury to bring a claim.
Step 1: Document the Incident: Your port should have a procedure in place where a report of an incident is documented on a “incident report form.” The documentation should include how the incident became known, a description of what happened, the location of the incident, what the port employee who prepared the report observed at the incident location, photographs of the incident location, and the names and addresses of any witnesses. The more the incident is documented the better. The report should avoid conclusions – by that I mean, the incident report should stick to the facts as opposed to reaching a conclusion that the port is “liable” or “negligent” or “this was the port’s fault.” The port’s general counsel should review the form and provide some training.
Step 2: Make Contact with the Person: Experience shows that a call to the potential claimant on a “customer service” basis to inquire how a person is doing if injured or inquire about the nature and extent of a property damage claim can help. The port employee should be careful not to admit any liability. An early call may resolve incidents early with perhaps the payment of a dry-cleaning bill or replacement of a damaged piece of clothing. Therefore, have a port staff person call and find out what happened and if the person was injured. The port staff person should document the conversation and include it in the report. Make sure you discuss the process with your port attorney to avoid taking an action which will impair your liability insurance. Here it is helpful to have a delegation of powers to the manager or executive director to settle smaller claims. The “best practice” here is to always get a release in exchange for payment of funds. Here again, port counsel can help with a form.
Step 3: Port Risk Management Review: The report should be reviewed, and a determination made if there are any immediate maintenance or repairs or alternations to port property that are necessary to prevent or reduce the possibility of another incident. This should be done as soon as possible. Washington court rules provide that “subsequent remedial measures” are not admissible to prove liability. The purpose of this rule is to encourage fixing a problem without worrying that the fix will be used against the owner in court. Also, the risk management review should include a look at other potentially liable parties to determine if a port tenant or other third party may be at fault.
Step 4: Contact the Port’s Insurance Broker and Applicable Tenant Insurance Companies: Unresolved incidents should be reported to the port’s broker. Insurance policies require that the port not act in a way that “prejudices” the rights of the insurance company. The worst-case scenario is that the port does not report the incident, three years later a claim comes in and the incident location has been altered or demolished such that the insurance company can claim its ability to defend the claim was “prejudiced.” The broker will typically put the relevant port insurance company on notice. Keep in mind that port tenants typically provide coverage under their insurance policies to the port in the form of “also insured” or “additional insured” certificates. Depending on the severity of the alleged injury, the insurance company(s) may send out an investigator or even experts to look at the scene of the incident.
Step 5: Keep Involved to Protect the Port’s Deductible: The port’s liability insurance company(s) has two separate duties. First, the insurance company(s) must “defend” the port by investigating a claim and if the port is sued paying an attorney to defend the port. The defense cost is usually 100% insurance company paid. If there is a trial, the defense costs can easily exceed any court judgment. Second, the insurance company must “indemnify” the port by paying up to the amount in the policy to settle a claim or satisfy a court judgment. Importantly, the first dollars used to settle a claim or pay a judgment is the port’s deductible. Most ports have at least a $10,000 deductible so any settlement for less than $10,000 is the port’s money. Consider that a fast settlement will save the insurance company defense costs but result in payment of the port’s deductible. Years ago, I represented a port that had a $25,000 deductible per incident. Lo and behold the insurance company appointed lawyer was recommending early settlement of several slip and falls on docks for amounts less than $25,000. It seemed the word got out that the port was settling these cases and more of them showed up. The insurance company was happy because the settlements were quick (less defense costs) and always using the port’s deductible. The insurance company appointed attorney was happy because the insurance company was sending him cases. But the port was not so happy because it was writing checks. The point here is that the port should have a staff member (or its attorney) keep involved in any claim to make sure that the insurance defense lawyer is reminded that the lawyer represents just the port and that claims are appropriately settled without regard to saving defense costs. Even after a lawsuit is started, the port should keep involved with the insurance company appointed attorney. Ask the lawyer to come to the port and meet with the port management and the port attorney. Instruct the attorney to provide a copy of all reports made to the insurance company by the attorney or experts to the port. In sum, make sure the appointed attorney is looking after the port’s interest first. The decision to settle or go to trial impacts the payment of the deductible and could have implications of staff time needed to attend depositions and testify at trial. The whole lawsuit and the way it is managed by the lawyer could have implications on the port’s reputation in the community. Stay involved in the defense to manage these issues.
Experience shows that incidents will occur, and claims will be filed. However, with appropriate procedures in place ports can greatly minimize the risk of an adverse legal outcome. As always, please contact your port counsel with any questions regarding this topic.
And, if you have a particular question for a Knowing the Waters, please email me at firstname.lastname@example.org.