Yeah that one seems to be a fuzzy point. She says she quit because the frivolous suits were bankrupting her (and the state of Alaska). I understand that she would be responsible for paying for any lawsuits - not sure how much the State would be responsible for.
Seems she was in a damned if she did, damned if she didn't spot. Not an enviable spot to be in - especially as a politic figure.
... which again, doesn't bode well for her abilities as a politician. If she can't successfully navigate the minefield of governing 600,000 people without bankrupting the state in lawsuits, how's she going to govern 300 million.
My understanding is that Obama was a fairly good (competent) if unexceptional senator; Palin did not strike me as a competent governor.