Scrutiny of Officials Liability

Insurance coverage faces increasing exposure by ‘anti-riot law’

by Matthew Kelly, Florida League of Cities

Public Officials Liability is one of the most important liability coverage for cities. It covers cities for liability (claims and/ or lawsuits) arising from errors and omissions, employment practices and land-use decisions, among other alleged wrongful actions or inactions by a city official or employee. These types of liability lawsuits can be extremely costly since, in many cases, there are components of the suit that allege violation(s) of civil rights – bringing the lawsuit into federal court where sovereign immunity legal protections to cities (in Florida, liability caps of $200,000 per person/$300,000 per occurrence) no longer apply.

Recently, there has been enhanced scrutiny on city governments across the United States that has led to increased frequency and severity of Public Officials Liability lawsuits. A few of the key drivers are:

‣ Heightened awareness and sensitivity by the public of their civil rights

‣ Media coverage of cities’ actions and/or inactions relating to the COVID-19 pandemic

‣ Employment law matters relating to COVID-19 such as medical leave, return-to-work and terminations

‣ Media coverage of municipal law enforcement agencies’ actions – past and present

‣ Social media platforms providing broad public access to communications to or from city officials

‣ The enhanced partisan divide on many issues, including historically nonpartisan issues such as public health

‣ The ever-increasing transition from hotel to person-to-person lodging bookings, bringing more focus on short-term vacation rentals

‣ Broad public records laws giving access to individuals and reporters to cast wide information-request nets into the past to search for the next headline story.

ENTER STATE’S COMBATTING PUBLIC DISORDER ACT

On April 19, 2021, yet another exposure not protected by sovereign immunity can be added to the list with the passage of Florida’s Combatting Public Disorder Act – also referred to as “HB-1” or Florida’s new “anti-riot law.” This new controversial law aims to mitigate the potential for lawful and peaceful demonstrations from becoming unlawful and violent. The law defines a riot, changes municipal law enforcement budgeting policies and creates new criminal penalties for riot participants. As it pertains to liability exposure, the law also opens the door for unlimited liability if a city does not appropriately respond to a riot:

A municipality has a duty to allow the municipal law enforcement agency to respond appropriately to protect persons and property during a riot or an unlawful assembly based on the availability of adequate equipment to its municipal law enforcement officers and relevant state and federal laws.

The law further explains that, should this new duty be breached, the city may be held liable for any and all damages proximately caused by the breach of duty. And these damages are now infinite and without the protection of the $200,000 per-person/$300,000 per-occurrence sovereign immunity caps. Even if the city has insurance, the limits of insurance may not be adequate to cover the damages.

Matthew Kelly is Assistant General Counsel at the Florida League of Cities.

Remember, action today can prevent a crisis tomorrow.

– Steve Shallenberger

THE COMMERCIAL INSURANCE MARKET RESPONSE

Commercial insurance carriers are recognizing the increased national exposure to Public Officials Liability coverage. Carriers are scaling back their government-industry clientele, increasing liability rates/premiums, reducing available coverage limits, increasing deductibles and/or expanding exclusionary language to transfer the risk back to the government itself.

The most common approach insurance carriers use to protect themselves from Public Officials Liability is through the mechanics of their limits of insurance. Because they can be somewhat technical, we explain two of the most common “limit tactics”:

▸ Watch out for Public Officials Liability aggregate limit – When you have an “aggregate” limit, the limit stated in your insurance policy is for your entire year of coverage. This aggregate or annual limit could be exhausted by one claim. If this happens – especially early in your policy period – your city does not have any available insurance for the remainder of your policy period. This issue can be avoided by selecting a policy with “per-occurrence” limits of insurance, which means that the limit stated in your policy is available for every claim occurrence your city encounters. The difference between these two types of limits can account for millions of dollars.

▸ Watch out for legal defense costs within the limits – Public Officials Liability claims are often lawsuits, which require the insurance carrier to provide your city with an attorney to defend you. Because these types of claims are often complex, legal defense costs can be substantial – sometimes even exceeding the value of the damages being alleged or awarded by a court. When your legal defense costs are “within” the limit of insurance, your insurance limit is eroded by the legal defense costs – leaving less limit available to cover you for damages. This issue can be avoided by selecting a policy in which legal defense costs are outside the limit, where the insurance carrier pays for the legal defense costs and your entire limit is available to pay for damages.

REVIEW YOUR PUBLIC OFFICIALS LIABILITY INSURANCE COVERAGE

Most city insurance policies renew on October 1. State law requires that insurers provide a renewal offer with at least 45 days advance notice, so this requirement means a mid-August time frame for the vast majority of Florida’s cities.

It is important to conduct a review to ensure your city is adequately protected. In advance of your upcoming insurance renewal offer, the following questions may be asked of your insurance carrier:

▸ Will you be renewing my Public Officials Liability coverage for another year?

▸ How much are my liability rates going up?

▸ Is my Public Officials Liability limit of insurance an aggregate limit or a per-occurrence limit? (Per-occurrence limits offer greater coverage; see “Public Officials Liability aggregate limit” section above.)

▸ Are legal defense costs “within” or “outside” my Public Officials Liability coverage limit? (Legal defense costs “outside” the limit offer greater coverage; see “Legal defense costs within the limits” section above.)

If you receive unfavorable answers to the questions above, there is still time to evaluate insurance options.