Hospital commission considers board insurance
The Eureka Springs Hospital Commission is looking into purchasing an insurance policy for all the commissioners.
At the commission’s regular meeting Monday night, chairman Tyson Burden introduced Virgil Fowler of The Insurance Store, who said the commission qualifies for two types of insurance: directors and officers coverage and elected and appointed officials coverage.
“We have to have political officials coverage … but it also has to double as directors and officers coverage, as y’all are the board of directors for the hospital,” Fowler said.
Fowler said most coverage for political officials excludes decisions made for healthcare, while most directors and officers coverage excludes elected and appointed officials. He said it was challenging to find two companies to agree to work together, or to find one policy that covers both. Because the commission owns the hospital, Fowler said, “it creates about 85 employee exposures … plus about eight contracted workers.”
Fowler presented a proposal from Atlantic Specialty Insurance Company, which he said is a Triple A rated company. In the proposal, Fowler said, there are a few different retentions.
“The retention is going to work essentially … like a deductible,” Fowler said.
The retention rate depends on the type of loss, Fowler said. He said a loss where you know the exact limit of damages has a retention of $25,000, while a loss with unlimited damages has a retention of $0. The employment practices liability portion of the proposal has a $50,000 retention, Fowler said.
Fowler recommended removing the fiduciary liability from the proposal, saying the city already takes care of that.
“That doesn’t seem to pertain to your circumstances as the handling for the monies for employees would reside on the municipality itself and not the board,” Fowler said. “It’s a relatively inexpensive coverage, but still it might not be necessary.”
The retentions are set at $25,000 and $50,000, Fowler said, because the commission is in a high-risk industry.
“There have been an extraordinary amount of lawsuits and they want each risk to self-insure to a certain point,” Fowler said.
Fowler said he requested $10,000 retentions instead of $25,000 retentions.
“They said even if we put this into effect, we can amend the policy after the fact,” Fowler said.
The total coverage will cost $28,654 a year, Fowler said, including the fiduciary liability. Without the fiduciary liability, he said, it costs $27,604. Fowler said any kind of legal expenses will be included in the existing limits in the policy.
“So what you’re saying is … if you have a $6 million lawsuit, it’ll probably all get eaten up by legal costs,” said commissioner Kent Turner.
“There’s a chance,” Fowler said. “It depends on the extent of the legal costs.”
Turner moved to approve the $28,654 for the insurance and commissioner David Carlisle asked who currently covers the commission. Burden said the commission has some coverage.
“Because we’re a municipality, the municipal league covers us to some degree,” Burden said. “Then we pay about $200 a year for a surety bond … though to be frank with you, we’re unclear how much that would help.”
Burden added, “It’s been brought up several times in the past that commissioners have been concerned that we don’t have enough coverage for liability. We started getting these bids because of that concern.”
Burden said he spoke with the commission’s attorney, Megan Hargraves, who recommended purchasing the insurance.
“She said yes, we do have tort immunity but anybody can sue us,” Burden said. “In order to prove our tort immunity, we would have to mount a defense and mounting that defense could cost us money.”
Burden said the insurance will cost “a little more money than we expected,” but it’s a good idea to ensure the commissioners are covered as individuals and as a commission. Turner agreed and said it was difficult to find a company to offer coverage.
“There’s just no one that really wants to take on this coverage,” Turner said. “I keep being referred back to the municipal league to find exactly what they provide for us and that seems to be a difficult answer to get.”
Turner said the cost of the insurance is less than he expected. He figured it would cost between $25,000 and $35,000, Turner said.
“This kind of insurance is not cheap,” Turner said.
Burden said the commission would need to call a special meeting sometime in the next two weeks when Fowler receives quotes for the hospital’s general liability insurance and the directors insurance.
“So if we did want to table this and have back-to-back special meetings later on, that will give us a chance to check with the city … about exactly what is our coverage under the municipal league currently,” Burden said.
Commissioner Barbara Dicks said the commission has a surety bond that she’s never seen.
“I don’t know what it pays or what it’s about,” Dicks said.
“That just means if we steal something, the city gets reimbursed,” Turner said. “That doesn’t protect us or anything.”
The commission then voted the motion down and Burden said the commission could address the issue at a later time.
In other business, the commission heard from Turner about the status of the Brown House, a house adjacent to the hospital. The commission purchased the house for $140,000, and recently considered demolishing it to create more parking spaces.
Instead, Turner moved to solicit bids to renovate the Brown House so it can serve as an administrative office. Turner said the majority of the value in the property is in the building itself. The Eureka Springs City Council would have to approve demolition of the building, Turner said.
“I kind of put myself in the position of the city council man,” Turner said. “I would be hard-pressed to allow us to tear it down unless we had some pretty specific ideas of how to rebuild it.”
Turner said the area could still be expanded for parking with the existing building there.
“It appears to me there would be plenty of room to keep that building,” Turner said. “We need some administrative office space anyway. We could move most if not all administrative functions out of the hospital and into the building.”
The commission unanimously voted to approve Turner’s motion. Turner then moved to start a bid process to find someone to design and estimate the cost to place a driveway in front of the Brown House to connect to the hospital, and the commission unanimously voted to approve it.
Also at the meeting, the commission heard from CFO Bill Couch about the hospital’s financial status. Couch said the cash receipts for May were $548,000, while the expenditures were $551,000. That’s a loss of $3,000, Couch said, a “tremendous improvement” over the month of April.
“This is our strongest cash profit month since October 2020,” Couch said. “We’re trending in the right direction.”
The cash balance at the end of May was $1.2 million, Couch said, which could sustain the hospital for 62 days without any revenue coming in.
“That’s good,” Couch said. “That’s not too shabby compared to some of the other hospitals I’ve worked with.”
He’s working toward getting the 2020 cost report filed, Couch said. The report is due at the end of July.
“I am comfortable that we will meet that deadline,” Couch said. “We will work toward getting our general ledger and financial statements in proper order as soon as possible.”
The commission’s next regular meeting is scheduled for 6 p.m. Monday, July 19, at The Auditorium.