Insurance paid $321,000 legal defense bills, releases District

SEELEY LAKE - The Seeley Lake Sewer District Board and one of its former insurance providers have signed an Assignment of Rights and Claims that will keep the District from having to pay legal fees for defending the District against a 2018 lawsuit.

There has been a longstanding question over whether or not the District’s insurance would cover the cost of the defense because the District changed insurance companies just days after the lawsuit was filed. The District did not know of the lawsuit when it made the change.

The District’s policy with Montana Association of Counties Joint Powers Insurance Authority Property and Casualty Trust (MACo PTC) expired on July 1, 2018. The District was then covered by a policy from The Cincinnati Insurance Company.

District resident Don Larson filed the lawsuit against the District with the court on June 26, 2018 but the District wasn’t served the lawsuit until more than a month later. The case was dismissed on May 21, 2020. The court denied the District’s motion to award its legal fees, which according to MACo PTC amounted to $321,500.99.

Cincinnati refused to cover the defense claiming the suit was filed prior to the policy’s start date and the District failed to inform them of it per the terms of the policy.

MACo PTC informed the District in August of 2018 that because they were not notified of the lawsuit until more than 30 days after the policy expired there was no coverage. Despite this, MACo PTC agreed to defend the District but reserved the right to seek reimbursement from the District.

The District received a letter from MACo PTC requesting reimbursement in July of 2020.

District Manager Jean Curtiss explained to the Board at its Oct. 22 meeting that by signing an Assignment of Rights and Claims, MACo PTC would go after Cincinnati for payment of the defense instead of the District. The only cost to the District would be the $1,000 deductible.

The Board voted to sign the agreement and MACo PTC accepted it.

In the agreement, MACo PTC states that they feel that the Cincinnati policy required the District to do an impossible thing, report the lawsuit when it was filed even though the District had no knowledge of it. Under Montana law, a case can be filed and then not served to the defendant for up to three years.

In addition to not seeking reimbursement from the District, MACo PTC also agreed not to enter into an agreement with Cincinnati resolving the claims unless Cincinnati also agrees to release the District from all claims.