Fair victim settlement shields Indiana from company

Indiana lawmakers presented their decision to offer an additional $6 million to victims of a deadly stage collapse at last year's state fair as a way to help those who weren't adequately compensated by its first settlement. But buried in the legislation was a clause protecting the state from having to pay even more.

The clause sought by Attorney General Greg Zoeller enabled him to tie the state money to a settlement with the company that owned the stage, and thrust the state into the role of negotiator as lawsuits swirled over the Aug. 13, 2011, stage collapse at a show by country duo Sugarland.

The state would make $6 million available, and victims could share another $7.2 million offered by the stage owner and manufacturer if they agreed not to sue the companies.

"This is about putting victims first," Zoeller said in a June 22 press release announcing the combined settlement, which he said lawmakers had approved.

What Zoeller didn't tout — and what has surprised even the bill's author — was that the enhanced settlement also was designed to shield the state from potentially paying out even more for the collapse that killed seven people and injured dozens more.

Documents obtained this week by The Associated Press show Mid-America Sound Corp., which owned the stage, was ready to sue the state to get back any money victims won in lawsuits against the bankrupt the companies.

Invoices signed by fair executive director Cindy Hoye in the months after the collapse include an "indemnification" clause that requires the fair to assume all responsibility for any judgments, fines, injuries and loss of life resulting from use of the equipment and to hold the companies harmless.

Fair spokeswoman Stephanie McFarland referred questions about the invoices to the attorney general's office Tuesday.

Attorneys for Mid-America claim the invoices constitute binding contracts, a contention the state disputes. But after the state had already paid $5 million, and with lawmakers prepare to provide $6 million more, Zoeller decided it was better not to test that argument in court.

Zoeller's point man on the fair settlement, Larry Hopkins, told The Associated Press the plan tying the additional state money to the settlement offer from the two companies was the best way to avoid years of wrangling in court while protecting the state from a potentially massive judgment.

"The idea would be that if these claimants sued Mid-America and they succeeded in winning the lawsuit and there was a judgment, that potentially the state then is on the hook for that, even though we would fight it as vigorously as we could," Hopkins said. "Part of our mission with that new legislation was to try and deal with that indemnification claim and extinguish it."

The potential threat to the state was huge. Indiana law caps the state's liability at $5 million per incident for claims made directly by victims, but state lawyers said the "indemnification" argument Mid-America used could have fallen outside that cap.

It's still unclear whether the settlement will stand. Zoeller's office has said a "sufficient number" of victims must accept the offer for it to go forward, but it won't say what that number is. The state has secured waivers from 51 of the 62 victims and their estates, agreeing to clear Mid-America Sound and stage manufacturer James Thomas Engineering of any wrongdoing. The companies have until Aug. 15 to decide whether that's enough for them to agree to the settlement and let the state off the hook.

Attorney Kenneth J. Allen, who represents the estates of three women killed in the collapse, says the victims' families are appalled that the state is carrying water for a private company. The families of the three — Alina Bigjohny, Christina Santiago and Tammy Vandam — have refused to agree to the settlement because they don't think the companies should be released from responsibility. They've filed a lawsuit in Marion County Superior Court objecting to the deal.

Allen said the families are willing to agree not to sue the state, but they won't release the companies from liability because the law doesn't require it and because they want their day in court.

"My victims are most interested in justice here, and that's not going to be done by backroom deals," Allen said.

Sen. Luke Kenley said state lawyers approached him in February about altering the legislation to protect the state against Mid-America. James Thomas was later added to the deal by Zoeller's office, although it had not threatened to sue the state.

"It was considered to be a trade-off," Kenley said. The companies would put their insurance policy amounts into a pool the state would contribute to.

"That would probably take some heat off of them," Kenley said of the companies. "And as a practical matter, it would obviate the necessity for having to litigate the indemnification clause that they were putting on these invoices."

Gov. Mitch Daniels, who asked lawmakers to find extra money for the fair victims in his final State of the State address, said the attorney general's office alerted him to the move and he trusted Zoeller's judgment on the issue. Daniels said Tuesday he would have approved the additional money for the victims whether or not the Mid-America settlement was included.

Zoeller spokesman Bryan Corbin said the primary goal of the combined settlement was to get money to victims quickly without years of litigation. He said the state never hid the fact that the combined settlement would free the state of any claims by Mid-America and included that information in its news release announcing the enhanced settlement.

Even so, the move to protect the state caught some lawmakers who had worked on the legislation by surprise.

Rep. Jeff Espich, the Uniondale Republican who submitted the bill, said he knew Zoeller's office had been given "significant latitude" to distribute the money, but he said he was unaware that Mid-America had threatened to sue the state if it lost in court.

Rep. Ed DeLaney, a Democrat who proposed lifting the state's payout cap from $5 million to $22 million, said he, too, was unaware that the additional money was tied to a settlement with the two companies. He said the move amounts to the state picking winners and losers in the aftermath of the stage collapse.

"There is a fundamental unfairness here," he said Tuesday. "Every other player is exposed to pay the limits of its insurance policy and its assets."