As Tom Barrett exited his car in front of the Village Hall, he saw Mrs. Jones leaving the building. Books were piled high in her arms and she was waving to Billy Wright as he delivered the morning newspapers. Suddenly, books were flying everywhere and Mrs. Jones came tumbling down the steps. Rushing to her side, Tom, the new city building superintendent, observed what appeared to be a badly broken right ankle. "Just lie still Mrs. Jones. We'll have an ambulance here fast, and don't worry, the City will take care of all of your medical bills!"

Legal liability and indemnification are among the most frequently misunderstood concepts of insurance and self-insurance programs. The clouds of ambiguity that envelop these key concepts often lead to differences of opinion and misunderstandings between municipalities, claimants, and insurance companies or claims administrators. Whether an entity is self-insured or insured they must still come to grips with these key concepts and understand them thoroughly.

Our state and federal laws impose certain duties and obligations on all of us. These laws come to us by statute, case precedent, and common law (that which has existed through tradition). A breach of the law which results in an injury or damage to a third party can be defined as a tort (negligent act). Negligence imposes liability (or an obligation) on the person or entity who has committed a wrongful act and legal liability is a prerequisite for payment to a third party under a liability insurance policy. In other words, an entity must commit a wrongful act that results in injury or damage to a third party before payment can be considered. Absent this prerequisite, the injured party is in all likelihood not entitled to payment or indemnification.

In promising to pay all of Mrs. Jones' medical bills, Mr. Barrett wrongfully assumed, as many people do, that Mrs. Jones' fall on city property in and of itself created an obligation to automatically indemnify her for any expenses or damages incurred. Had the steps been in a state of disrepair or if an unnatural condition existed (constituting a breach of duty to maintain and repair) a duty to Mrs. Jones may have been violated. On most occasions, decisions as to whether or not a negligent act has been committed can almost never be determined immediately. It is usually a fatal mistake to commit to a position until a thorough investigation has been conducted. Mr. Barrett's concerned though erroneous comment that the City would take care of all of the bills, unfortunately leaves the injured party with a false impression. If necessary, it then becomes difficult to explain a denial of payment to an injured party who has previously received some type of commitment. Invariably these parties become suspicious and/or hostile resulting in legal actions.

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*Mr. Vines has been a member of the insurance community for seventeen years. Formerly a senior excess and professional liability analyst with the home office of the CNA Companies, he is presently the manager of the liability division of Martin Boyer Company, Inc. Aside from his technical and administrative responsibilities, he lectures and presents in-service seminars for various members of the public and private sectors.

September 1985 / Illinois Municipal Review / Page 11

The ultimate purpose of an insurance or self-insurance program is to "make whole" (indemnify) a wrongfully injured or damaged party. This concept has been accepted by the courts throughout our land as common law, and is indeed the cornerstone upon which the entire insurance industry is built. Once a determination has been made as to legal liability, decisions must then follow concerning the indemnification process. The amount of indemnification due to a particular claimant takes into consideration many factors, i.e., the type of injury, medical bills, lost wages, other physical conditions having a bearing on the injury, contributory and comparative negligence, and expenses especially related to the accident. It is important to understand that the doctrine of indemnification is a process of restitution and not enrichment.

Current Illinois law allows for a reduction of the value of a particular injury based upon the percentage of the claimant's own negligence, if any. Mrs. Jones who recently fell down the city steps, had her arms full of books and was not paying attention to the task of descending the steps. Her own negligence may very well preclude her from receiving any payment whatsoever. Her negligent act however, could be construed to constitute only 50% of the cause of the accident. If this were true, the value of her claim would be reduced by 50%.

In summary, many factors determine whether or not an injured party is entitled to indemnification. The "primary prerequisite" is the existence of negligence, that violation of the law that imposes legal liability on the part of the wrongdoer. Many factors play a part in the indemnification process and they must each be weighed carefully before an accurate assessment of value can be determined. Each injured party is entitled to a quick and courteous decision concerning liability and indemnification and; how we initially respond to these accident victims plays an important and integral part in our risk management programs.

Page 12/ Illinois Municipal Review / September 1985