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Insurance contract - County taking steps to prepare for legal battle

Wednesday, February 19, 2014 - Updated: 8:29 PM

By HEATHER NELLIS

For the C-S-E

FONDA -- The threat of a lawsuit has Montgomery County officials lining up funds in case they have to hire outside counsel.

During a brief Montgomery County Legislature Finance Committee meeting Tuesday, legislators moved a resolution to allocate $30,000 for professional services.

Executive Matthew Ossenfort said he requested the transfer as a precautionary measure, because the budget's professional services account doesn't have enough funds if outside counsel has to be hired.

Casper Wells, owner of Hays & Wormuth Inc., recently wrote a letter to Ossenfort to serve as a notice of claim. A notice of claim has to be filed before someone can sue a local government.

The letter, dated Feb. 5, is addressed to Ossenfort and includes two brief paragraphs. It indicates Wells is seeking $500,000 in damages for "breach of contract in connection with awarding of the county's liability insurance coverage effective Jan. 1."

"I'm not sure if it's a proper legal notice," Ossenfort said.

He's treating it like one, though.

"As far as I can tell, there isn't a basis for the claim, but I did forward it to our insurance carrier," Ossenfort said.

Wells is alleging breach of contract, as Hays & Wormuth was not named the carrier for the county's liability insurance by the now-defunct board of supervisors late last year. Wells reportedly co-owns the company.

Instead, supervisors named John Mancini as the insurance agent. Mancini is listed as the CEO of Hays & Wormuth on the Department of State Division of Corporation's website.

At a Dec. 10 meeting last year, Mancini told supervisors Hays & Wormuth is still in existence, but would dissolve in four months.

If the board kept him around, though, "it's no change of services, no changes in the company," Mancini told the supervisors.

It was an apparent change for Wells, however. A note from Wells indicates the company's closing carries 11 job losses, including his own.

A search of the county's adopted resolutions indicates several were adopted relating to Hays & Wormuth for general liability insurance coverage through Travelers. Resolutions were adopted annually between 2008 and 2012, and include language that agreements "may be" renewed in forthcoming years.

Ossenfort said the coverage isn't contractual, and the resolutions weren't binding. He said the county does not have a contract with Mancini for the service, but he did sign a $280,000 voucher in January to pay for the insurance.

At a December meeting with Mancini, supervisors asked about liability, and whether anyone from Hayes and Wormuth expressed to county officials they no longer sought to provide the service.

"You're looking at Hayes & Wormuth," Mancini said.

The resolution was moved to the full board and adopted later that month, but it was not unanimous. Concerns were expressed whether Hays & Wormuth had rights to renew the agreement, and whether it was a contract.

County Attorney Douglas Landon told supervisors it wasn't.

"There is not a contract with Hays & Wormuth," Landon said. "We purchase the insurance from the carriers through Hays & Wormuth, so our arrangement is with those insurance companies. However, the resolution adopted in 2012 retains Hays & Wormuth to provide insurance, and indicates it may be renewed for successive years. Of course, that renewal is subject to a mutual agreement of the parties."

One issue Ossenfort does have with the coverage as it stands is the board of supervisors didn't issue a request for proposals for the liability coverage -- as it had done in prior years -- before choosing Mancini in December.

Ossenfort said he's looking forward to a transparent and fair RFP process this year for next year's services.

"A resolution was passed Dec. 17 identifying John Mancini as our agent for a year. That's what I'm operating under," Ossenfort said. "They adopted it last-minute, and I couldn't wait. We couldn't have a lapse in insurance coverage. So the issue here lies in the resolution and the way it was done."

Ossenfort said he has wanted to increase the line item for professional services since he took office. But Wells' letter made it a priority.

"If something happened, and we wanted to move quickly, we couldn't because there's no money in that line. Now, it's there if we need it," Ossenfort said.

"It was something that stood out to me when I first saw the budget. It wasn't something high on the list, but I thought it was appropriate, especially with everything that has happened with a notice of claim. I want to be prepared," he said.

Legislators did not discuss the matter during Tuesday's meeting, but were in favor of moving the resolution to the full board to be considered at its Feb. 25 meeting. If approved, the funds will be transferred from a line for contractual items.

"It is a housekeeping item," Finance Committee Chairman Martin Kelly said.

If a lawsuit is filed, it will be the second insurance-related suit the county will have to reckon with.

The Montgomery County Health Insurance Trust, its board members, the county and city of Amsterdam were sued on allegations of a breach of contract.

Benefits Marketing of Amsterdam, and its proprietor Pasquale Baia, are seeking at least $1 million in damages, according to the suit.

Officials are reportedly awaiting a decision on that case.

-- Staff reporter Caroline Murray contributed to this report.

     

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