Public Risk September 2015 by Moire Marketing Partners

Published by the Public Risk Management Association

www.primacentral.org

SEPTEMBER 2015

AND PUBLIC SECTOR LIABILITY PLUS

SEWER BACKUP COVERAGE The Case for Risk Aversion and Restraint

CLAIMS AGAINST CORRECTIONS The Public Risk Management Challenge

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Volume 31, No. 8 | September 2015 | www.primacentral.org

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration. PRESIDENT Dean Coughenour, ARM Risk Manager City of Flagstaff Flagstaff, AZ

CONTENTS

PAST PRESIDENT Regan Rychetsky, ABCP Director, HHS Enterprise Risk Management and Safety Texas Health and Human Services Commission Austin, TX PRESIDENT-ELECT Terri Evans Risk Manager City of Kingsport Kingsport, TN

Jani J. Jennings, ARM Insurance & Safety Coordinator City of Bellevue Bellevue, NE

6 DRONES AND PUBLIC SECTOR LIABILITY

Scott Kramer Risk Manager Montgomery County Commission Montgomery, AL

By Brian Viscusi

Amy Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN

11 SEWER BACKUP COVERAGE

The Case for Risk Aversion and Restraint

By Michael Nolan

DIRECTORS Lori J. Gray Risk Manager County of Prince William Woodbridge, VA

Scott Moss, MPA, CPCU, ARM-E, ALCM P/C Trust Director CIS Salem, OR Tracy Seiler, ARM-P Director of Risk Management Services Texas Association of Counties Austin, TX

16 CLAIMS AGAINST CORRECTIONS

The Public Risk Management Challenge

By Joe Jarret

NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Donna Stigler 888.814.0022 • donna@ahi-services.com

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine.

IN EVERY ISSUE 4 News Briefs | 19 Advertiser Index | 20 Member Spotlight

SEPTEMBER 2015 | PUBLIC RISK

REGISTRATION NOW OPEN! Institute.primacentral.org

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Message from PRIMA President Dean Coughenour, ARM

THE RISK MANAGEMENT PUZZLE

RIMA, YOUR national organization, has been busy putting together next year’s conference in Atlanta. I can share with you that we have had scores of outstanding submissions for next year’s conference and that it will be a very difficult task to select a balance of educational sessions that all will find beneficial and energizing. If you have not already done so please be sure to schedule and attend what is sure to be a professional education winner. PRIMA Institute is just around the corner, November 4–6, and I encourage you to attend. This is risk management education at its best. You are sure to establish new relationships and friendships while gaining knowledge that will propel your career in risk management. In sharing with you this month, I reflect on the many facets of risk management and all the things we touch. I thought of the comparison of what we do to that of a complex and difficult puzzle. Or is it? Sometimes we make the Risk Management Puzzle harder than it is. But then when you think about it, everything is hard before it is easy. It is our ability to see the big picture and stay focused, that drives the success stories for many of us in our profession. I know, you say, “Dean, you just don’t understand!!” I realize that the Risk Management Puzzle is one that can seem daunting at times. But puzzles can be put together over time, with the help of many, and using a focused vision until a clear picture or result emerges. Once we can see the big picture, it becomes easier and easier to fill in the pieces. You can do this! For some of us, it may have been a long time since we really took a step back to see how far we have come. We must also take the time to understand that we still have puzzle pieces to put in place. It is entirely

too easy to get into “the groove” of the routine. The next thing we know, what we do has turned into a job and not an adventure of figuring out what the next puzzle piece is and how to put into place.

I realize that the Risk Management

There are so many pieces: compliance training, workers’ compensation, benefits, liability claims, auto claims, employment claims, policy development, contract review, negotiations, certificates, vendors, risk information systems, personnel issues, coaching, mentoring, training, new program development, subrogation, meeting after meeting and all of these things, after time, become a blur like so many pieces of an ever-growing puzzle.

Puzzle is one that

I would encourage you to take a step back and ask, what is really important? Why is risk management here? I would say it is people, our employees and helping them to do things in a safer way. Teaching them that we are all risk managers and in this together. We look for “new” ways to integrate the risk management matrix into the very fiber of our day to day operations. Step-by-step, day-by-day and at times asking ourselves, “am I really making a difference?” The answer most profoundly is YES!

many, and using a

It’s OK to sometimes put the wrong piece of the puzzle in the wrong spot. Albert Einstein, kind of a smart guy, said, “A person, who never made a mistake, never tried anything new.” If “Al” made mistakes, I think it is OK if we try new things to make an impact on what really matters, “people.”

can seem daunting at times. But puzzles can be put together over time, with the help of focused vision until a clear picture/result emerges. Once we can see the big picture, it becomes easier and easier to fill in the pieces. You can do this!

Dean Coughenour, ARM 2015–2016 PRIMA President Risk Manager City of Flagstaff Flagstaff, AZ

SEPTEMBER 2015 | PUBLIC RISK

News Briefs

NEWS

BRIEFS UNIVERSITY OF MIAMI TESTS CONCUSSION-DETECTING GOGGLES Like millions of other Americans, Shannon McCarthy and Ronnie Johnson watched the Women’s World Cup semi-final on TV and cringed when they saw the head collision between U.S. midfielder Morgan Brian and German forward Alexandra Popp as they leaped for the ball. Both ended up on the ground, Popp with a bloody gash. Four minutes later, both were back in the game after quick sideline examinations by doctors. Brian said she was asked to touch her finger to her nose, follow a moving finger, and to repeat the words “car,’’ “apple,’’ “elbow,’’ “ball’’ and “house’’ three times. McCarthy and Johnson watched with greater concern than the average fan because they play soccer for the University of Miami. McCarthy is a defender, Johnson a forward. Neither has ever had a concussion, but they’ve had teammates forced to quit the sport as a result of head injuries, reports the Miami Herald. That is why McCarthy and Johnson were at the UM Hecht Athletic Center, testing concussion-detection goggles being developed by UM doctors and a Pittsburgh-based software company called Neuro Kinetics. The project is being largely funded by a $500,000 grant from the NFL, Under Armour and GE. The U.S. Department of Defense has also been involved, as the goggles can be used on the battlefield for soldiers with head trauma.

“Everything with technology is so much more innovative now, so to have computerized, concrete findings on the spot that seem super accurate can only make us athletes safer and better off in the long run,’’ said McCarthy. “And it can fit in a backpack, so we can take it on road games, so there would never be an excuse for putting in a player who doesn’t belong on the field. I think it’s great. Rather than just doing a manual test, to be able to go into the locker room, put on these goggles and know for sure—not 50-50, not someone’s opinion—that’s going to help a lot of athletes.’’ Johnson agreed.

Hurricane football, soccer and volleyball players were being tested. They were in an exam room where researchers were testing the goggles’ technology. This winter, men’s and women’s basketball players who volunteer to participate will join the study, and next spring, baseball players and club athletes in rugby and lacrosse will be tested. A sample of 200 athletes is the goal, according to Dr. Mikhaylo Szczupak, one of the researchers working under project leader Dr. Michael Hoffer, a UM otolaryngologist and former U.S. Navy captain who developed the technology during two tours in Iraq. The goggles feature imbedded eye tracking and stimulus display and can detect brain injury by measuring eye movement and speed and symmetry of pupil dilation. This data helps determine at the site of injury whether an athlete is clear to return to the game or whether further medical attention is needed.

PUBLIC RISK | SEPTEMBER 2015

When she was in high school, a club teammate suffered a concussion, was out for more than a year and eventually quit. “She was stuck in a dark room for months, and when she came back out, she had to wear sunglasses and ear plugs, so it was really bad,’’ Johnson said. “She had gotten a concussion and then she kept playing and got hit again. People weren’t really monitoring it. When something happens, you have to make sure you’re OK before you go back in, which is why these goggles are really cool.’’ UM researchers will spend the next 18 months developing the goggles, then make a production model and hope for FDA approval. Their aim is three types of devices—a simple red light-green light version under $200 that could be used in youth sports, a more sophisticated model for college and pro sports and the most complex device to be used by physicians to aid with concussion treatment and clearance.

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CHICAGO WILL SOON HAVE THE HIGHEST SALES TAX OF ANY BIG U.S. CITY Chicago next year will once again have the highest sales tax rate of any major U.S. city, according to a new analysis from a tax policy research organization and reported in the Chicago Tribune. The city rate will hit 10.25 percent on Jan. 1, when a penny-on-the-dollar sales tax increase the Cook County Board narrowly approved goes into effect. That will push Chicago above four Alabama cities, including Montgomery, where the rate is 10 percent, and Seattle, where the rate is 9.5 percent, the Tax Foundation analysis found. “Chicago, by any measure, is the city that will have the highest rate,” Jared Walczak, a Tax Foundation policy analyst, said in an interview. The foundation is a 78-year-old nonpartisan, nonprofit group based in Washington, D.C. There are other, much smaller, towns in five states that will still have higher rates, but they are in places where there is either a much greater reliance on sales taxes than Illinois to fund government or are little towns that derive the bulk of their revenue from tourists, Walczak said.

NHTSA CHIEF: AGENCY REVIEWING SAFETY RULES FOR AUTOMATED CARS The head of the National Highway Traffic Safety Administration said the agency is reviewing federal vehicle safety rules to determine if they could conflict with self-driving vehicle systems that Google Inc. and others want to put on the road, reports Reuters. The agency is looking at a list of rules that could affect the rollout of features such as Tesla Motors Inc’s “autopilot” hands-free driving system or General Motors Co’s proposed “super cruise” system, NHTSA administrator Mark Rosekind told reporters. “We are trying to figure out if innovation will run up against regulations,” he said. Rosekind said it is not clear where the lines are between federal and state regulation of autonomous driving technology. But he said NHTSA inevitably will have a role in overseeing the safety of self-driving vehicles, and what standards should be applied to the technology. As an example, Rosekind asked “where’s the standardization” for the signals and alerts drivers get from robotic systems that are watching for hazards around a car, or controlling its direction. “The first time a self-driving car hits somebody, and someone gets hurt or is fatally injured, we’re going to get the phone call,” he said. Another area of uncertainty, Rosekind said, is what will happen as automated cars and human-operated vehicles mix on the road for what could be 20 or 30 years. “We have a lot of catch-up to do,” said Rosekind, who took over the agency in December.

“Chicago stands out because it’s a high sales tax amidst a sea of high taxes, even with the partial sunsets of the 2011 Illinois (income) tax hikes,” Walczak wrote in a blog post announcing the analysis. “Its rate as of January 1, 2016, will also stand out as the highest rate in a major city.”

Fully autonomous vehicles are still years from being ready for consumers to buy. But several automakers have said they intend to offer systems that will allow vehicles to navigate in traffic jams or in freeway driving even when the driver’s hands are off the steering wheel.

The county sales tax rate will rise from 0.75 percent to 1.75 percent. The balance of the sales tax comes from the state, city and mass transit portions. It’s not the first time Chicago will have the nation’s highest rate among major cities. The sales tax rate was 10.25 percent after the County Board enacted an identical 1-percentage-point increase in 2008. But that increase was rolled back over time, first under then-County Board Chairman Todd Stroger and then current board President Toni Preckwinkle, who in 2010 pledged during her campaign to kill of what remained of the increase. The board approved the new increase this week at her request, with Preckwinkle saying the tax was needed to restore financial health to the county’s underfunded pension system, cover rising payments for debt incurred before she took office and boost spending on roads and bridges.

SEPTEMBER 2015 | PUBLIC RISK

AND PUBLIC SECTOR LIABILITY By Brian Viscusi

PUBLIC RISK | SEPTEMBER 2015

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y 2020, an estimated 30,000 commercial and civil drones could be navigating the U.S. skies. Called either unmanned aerial vehicles (UAVs) or unmanned aerial systems (UASs), drones are classified by navigational methods, the type of drone operation and the drone’s physical characteristics. Although not new to the aviation market, drones are becoming an emerging exposure in the standard property and casualty insurance market. Emerging exposures such as drones provide vital stimulus for the design of new organizational ideas. Drones are unmanned aircraft that are operated remotely from the ground through a data-transmission link. In 2012, Congress passed the FAA Modernization and Reform Act, requiring the Federal Aviation Administration (FAA) to safely integrate commercial drone use into the domestic airspace by 2015. The FAA has two categories of commercial drones: public drones (operated and owned by governmental agencies such as police, fire and universities); and civil drones owned and operated by businesses.

In the public sector, universities, law enforcement, firefighting, disaster relief and search-and-rescue efforts now use or soon plan to use UASs. Public sector drones operate under a Certificate of Airworthiness (COA) from the FAA (civil use of drones operate under a similar authority called Special Airworthiness Certificate). In the absence of final guidance from the FAA, authority to operate a drone requires case-by-case requests and approval. Requests to operate a drone can be made on-line to the FAA stating the specifics (operator qualifications, type of equipment, when where and how it will be used, etc). To date, the FAA has approved approximately 2,000 public and 500 civil drone use requests, but these numbers are growing. In addition, states and local governments are passing legislation regulating and in some cases strongly restricting the use of drones, particularly for law enforcement. The FAA issued proposed rules in February, 2015, but is not expected to issue final rules for drone use until 2016 or 2017.

PROTECTING PUBLIC SAFETY OFFICIALS IS ONE ADVANTAGE Drones offer a variety of uses in the public sector, allowing law enforcement and fire departments to survey areas where people could be at great risk, such as in wildfires or hostage situations. Small drones cost less to purchase and operate than helicopters, and the training required to operate a drone is a fraction of the cost of training a helicopter pilot.

Today, approximately 18,000 U.S. police agencies and 30,000 fire departments could use drones for a variety of public safety missions. These could include wildfire and wildlife management, crop surveys, border protection, surveillance and search-and-rescue operations. Experts predict agriculture and public safety will account for 90 percent of future drone use.

PRIVACY RIGHTS A DRIVING ISSUE FOR DRONE USE Public agencies must walk a fine line in many instances— balancing where the rights of individuals and government agencies to use new technology intersect with the public’s right to privacy. In February 2015, the White House issued a presidential memorandum that outlines key requirements for drone use. These include: • Federal agencies must ensure their practices are consistent with limitations regarding the use, retention and dissemination of information collected by UASs. • Information collected that contains personally identifiable information cannot be retained longer than 180 days from collection unless certain circumstances apply. • Policies must ensure the protection of the First Amendment and not discriminate against persons based on ethnicity, race, gender, national origin, religion, sexual orientation, or gender identity. • Agencies have one year to establish provisions describing how to access their publicly available policies and procedures implementing the presidential memorandum.

SEPTEMBER 2015 | PUBLIC RISK

Drones and Public Sector Liability

• Due to rapidly emerging technology, agencies must examine their policies before deploying new UAS technology and at least every three years to ensure “protections and policies” keep up with technology. If states or local governments share drones, purchase drones with federal funds, or share the information gathered by the drones with others, the agencies must follow this executive memorandum and applicable laws and regulations. Of course, it is in the best interest of the public entity, school or other nonprofit agency to have its own policy to govern the appropriate use of drones on its behalf.

CIVIL LIBERTIES’ VIOLATIONS WILL BECOME FERTILE GROUND FOR LITIGATION According to civil liberties advocates, the 2015 presidential memorandum regarding drones does not go far enough. As far back as 2011, the American Civil Liberties Union issued a report, “Protecting Privacy from Aerial Surveillance,” warning US citizens that drones would “…allow for pervasive surveillance, police fishing expeditions, and abusive use of these tools in a way that could eventually eliminate the privacy Americans have traditionally enjoyed in their movements and activities.” UASs carry increasingly sophisticated camera equipment with high-powered zoom lenses. This technology can clearly photograph people on the ground from 15,000 feet, posing significant civil liberties issues that will only increase as drone technology continues its rapid advance. While the President’s new public reporting requirements strive for transparency, the collection and dissemination of public information will provide significant challenges to any state or local government and will raise Fourth Amendment arguments due to privacy concerns. Issues such as harassment, trespass and civil liberty breaches will be some of the issues public agencies must face and manage. Decisions about low-altitude airspace rights—those of the land owner versus those of the drone owner—are among those facing public agencies. Personal injury and privacy will be two areas of developing law, leading to litigation that public agencies will need to grapple with. And it won’t be cheap. While liability coverage for drone use may insure against personal injury, what about the drone that collects information outside the scope of its official duties? Will coverage apply or will public agencies find themselves defending these allegations under a reservation of rights or a coverage declination? The insurance industry responds to societal changes with new products, and the commercial aviation sector of

PUBLIC RISK | SEPTEMBER 2015

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the industry is no exception. Even though insurers have little credible loss data on which to rely, they are rapidly offering ways to provide coverage for this emerging risk. Nor does the available claims data focus on the emerging risks of personal injury, civil rights and trespass issues that will inevitably arise from public sector drone use. New technology creates new case law and increasingly specific solutions to complex problems. Examples of what types of claims will arise and how civil liberties claims will impact losses are largely hypothetical at this point.

PRIVATE USE OF DRONES IN PUBLIC SPACES Within certain limits, model aircraft hobbyists can use small drones without special authorization. Increasingly, however, cities face drone use in public parks, and colleges face use from hobbyists and others. College risk managers voice concern regarding the potential use of media-owned drones after campus emergencies. At this time, it is unclear if campus risk managers can limit the use of media-owned drones over campus locations. For colleges with agricultural programs, drone use is a promising arena for both monitoring crops and training students in drone technology. It is clear public agencies, including colleges, must remain aware of local and state regulations while awaiting final FAA rules.

or not the insured has received a COA from the FAA. In addition, risk managers should know physical attributes such as speed, flying height and weight of each of its drones. This information gives underwriters a more complete understanding of the exposures to be insured. The next question involves data breaches. When agencies gather photos or other logistical data, data breaches can occur. Cyber liability insurance can help public agencies address the aftermath of a data breach. Cyber insurers may also offer helpful risk management techniques that comply with federal data warehousing requirements—for example, how to safeguard records and ensure an appropriate record destruction policy.

HOW CAN A PUBLIC AGENCY BEST PROTECT ITSELF? The battle between private property rights and drone technology can place public agencies in the crosshairs of litigation. Working closely with an experienced broker can be the best risk management tool public agencies have in their toolbox. Brian Viscusi is senior vice president, Head of Client Group, Munich Re America Specialty Markets.

HOW WILL PUBLIC AGENCIES FIND COVERAGE? The first question regarding coverage is this: Will the standard commercial general liability (CGL) policy, properly endorsed, provide coverage, or is an aviation policy the best avenue to provide indemnity and defense? Be sure your policy covers the intended operations for using drones. Some liability carriers currently provide coverage at no additional cost and some carriers are excluding coverage. Insurance Services Office (ISO) recently rolled out endorsements that amend liability coverage under ISO’s CGL policy and umbrella/excess policies. These endorsements can be used to either exclude some or all coverage for drones or provide coverage for some or all coverage for designated, scheduled drones. Drone liability coverage is also available from commercial aviation insurers. Some state agencies like the State of Arizona are currently contacting their agencies to determine which departments have drone exposure and to ensure agencies have appropriate coverage when the exposure exists. Public entities, schools and other nonprofits should fully understand and document the intended use of the UAS and its exposure to loss, including pilot certification and whether

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SEPTEMBER 2015 | PUBLIC RISK

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SOCIAL MEDIA HORROR STORIES: DON’T BECOME ONE! SPEAKER: Charles Leitch, JD, Principal, Patterson Buchanan, Fobes & Leitch, Inc. PS DESCRIPTION: Ever gotten a call or seen a video of one of your students getting hazed? Ever been asked to comment on an employee’s YouTube video? Ever been asked to discipline an employee for conduct online? How about dealing with students bullying other students through Facebook? Perhaps you have established a social media policy for use yet you still experience the unique risks associated with social media technology. This Webinar will review ways to mitigate risks unique to ubiquitous social media through illustrative cases. The presenter will also discuss takeaways, including the best practices to protect students in schools, your employees from themselves and to safeguard your entity. AT T E N D E E TA K E AWAYS :  Discuss how to avoid becoming a social media horror story  Review the essential elements of a social media policy  Understand the unique risks social media present to your public entity and how to mitigate them W H O S H O U L D AT T E N D :  Risk managers  Human resources professionals  Claims managers  Underwriters  Superintendents  City/county counsel

For more information, or to register, visit primacentral.org/webinars.

SEWER BACKUP COVERAGE THE CASE FOR RISK AVERSION AND RESTRAINT

By Michael Nolan

SEPTEMBER 2015 | PUBLIC RISK

Sewer Backup Coverage

eter Senge’s internationally best-selling business book, The Fifth Discipline, contains an illustration about systems thinking titled, “The Beer Game,” which graphically illustrates a complicated chain of interactions involving brewing, warehousing, shipping and selling beer. Senge says the Beer Game “shows

how rational individuals that are part of a system but that act in isolation can get trapped in problems related to their own thinking and behaviors.” At any place in the relational chain, such isolation can disrupt efficient, on-time delivery of beer to customers. The Beer Game is an appropriate metaphor for other complex systems, including just about any public function that involves facilities, staffing, customer service, billing, or maintenance, where any interruption in system workings can upset customers.

For instance, not unlike the beer buyer who simply purchases a favorite beverage without thinking of prior manufacturing and distribution, typical municipal sewer customers seldom consider collection and treatment processes that occur subsequent to flushing the toilet. In many small municipalities, collection systems are old and defective; sewer maintenance is nonexistent, therefore, insurance underwriting is inexact. Sewers installed many years ago were clay pipe or cast iron. As these sewers have worn out, utilities have replaced many of them with PVC. Old remaining pipes in many instances are vulnerable to inflow and infiltration problems, which during rain accumulations can result in sewer backups. These are reasons commercial and homeowner insurers normally provide coverage with low coverage limits and high deductibles. Inflow and infiltration are not only problematic for an affected municipality and insurer; when multiple communities cooperate interlocally by contracting with a regional wastewater treatment facility, deferred maintenance in upstream collection systems can converge into the downstream interceptor sewers and accentuate possible backups and potential litigation. If weather patterns are erratic and rainfall is intense, the regional wastewater treatment provider and its insurer can become susceptible to “deep pocket” liability that may result. The Michigan Municipal League Liability and Property Pool is unarguably the poster child for such litigation. Historically, the pool had provided full insurance limits, including sewer backup coverage up to $10 million. The

PUBLIC RISK | SEPTEMBER 2015

pool experienced, on average, 150-to-200 minor claims annually and denied coverage successfully in most cases. Total incurred losses averaged typically $250,000 to $300,000 per year. Then between 1996 and 2000, recurrent rain inundations upended the continuity and provoked multiple class action lawsuits by hundreds of residents of several suburban communities near Detroit. During that interval, the consequences to the Michigan pool were anything but foreseeable. Sewer backup claims exceeded $25 million. Municipal leaders and judges susceptible to judicial retention often advocated for plaintiffs. Pool investigative and defense costs became exorbitant. Determining dates of loss and whether storms were a single occurrence or multiple events were often challenging. Flooding claims tended to cause fraud. Sewer coverage created adverse selection quarrels from members who had not purchased sewer coverage and were annoyed at having to defend and pay claims of members who had obtained coverage. Within a few years, according to pool executive Mike Forster, class action suits threatened to force the Michigan pool into insolvency. The pool dropped from $17 million in surplus on $25 million in annual premium to almost zero. Recounts Forster, “The problem was that the courts were not going to dismiss these claims, no matter what the law said (regarding negligence), no matter the circumstances. If it was a 500-year storm—it didn’t matter. The courts were not going to dismiss those claims; they were going to at least allow them to get to a jury…. We were forced to limiting coverage or go insolvent.”

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The Michigan pool responded effectually to the grim situation by lowering coverage limits to a maximum of $100,000 per occurrence (and aggregate), with a zero deductible. Sewer back up coverage is now provided only to members who pre-qualify with underwriting and premiums must pay for losses. The pool, however, provides claims advice on handling, regardless of coverage and attempts to pay claims involving individual homeowners or when legal responsibility is unclear. Forster says that the results have been extraordinarily successful. Class action and multiple claimant lawsuits have decreased dramatically from reduced availability to access insurance dollars. The vast majority of new sewer backup claims are covered by the new sublimit, and pool members as a whole are satisfied that they are not paying increased premiums to cover ongoing sewer problems of a small number of other municipalities. Nearly all other Michigan carriers and insurers have copied the Michigan pool’s decision by limiting their sewer coverage to varying degrees. “Since 2000, pool surplus has grown to $54 million on $19 million in premium, rates have stabilized and over $10 million in dividends have been returned to members,” Forster said. Throughout Michigan’s ordeal, the League Association of Risk Management (LARM)’s board and staff were paying attention. Several board members expressed concern about the number of LARM sewer claims and discussed ways to reduce them through exclusion of coverage and loss control, including education about backflow preventers, riders on home insurance policies and deductibles for members who wanted sewer backup coverage. On April 16, 2004, the LARM board excluded coverage of all backups from sanitary sewers, storm sewers and rises in ground water level, excluded inverse condemnation, and provided members with lower limits of sewer backup coverage for an additional charge and minimum deductible. Coverage was made conditional on the member implementing a written maintenance policy acceptable to the underwriter. LARM’s current sanitary sewer backup endorsement was approved by the board, effective October 1, 2004. LARM’s two coverage options with limits of liability for bodily injury and property damage arising from the backing up of sanitary sewers and any loss related thereto, are (1) $5,000 per building and $25,000 per occurrence or (2) $15,000 and $75,000

per occurrence. Between 2004 and 2014, LARM’s revised sewer backup coverage created the following remarkable results: WITHDRAWN CLAIM

DISMISSED CLAIMS

DENIED CLAIMS

PAID CLAIMS

$52,467

SETTLED CLAIMS

$19,500

On several past occasions during bidding competition, LARM’s private insurance contestants alleged to elected officials that private insurers provide their customers with better sewer backup coverage than LARM has. LARM representatives responded: “The real proof is whether our competitors pay or deny claims!” Normally when the private insurers were challenged to disclose particular claims information, the information was not forthcoming, and the outcome of the bidding was not affected by any differences in sewer coverage. During a recent rain storm impacting one of LARM’s member communities, a private contractor working on a state construction project attempted to deny a claim that involved a sewer backup. The private contractor was insured by one of LARM’s competitors who initially contended that the contractor had not been negligent. However, photographs taken during the flooding by homeowners and municipal employees were later provided to LARM’s adjusters and the competing insurer’s adjusters. The photos proved that during the storm, the private contractor had neglected to cover manholes properly; therefore the competing insurer relented and paid the claim. In conversations between LARM and the private insurer representatives, the word “subrogation” was used, which may have been a motivating factor in payment of the claim. All the foregoing said, LARM implemented the strategy of lower limits with a higher deductible to protect LARM members at large from the unpredictability of severe sewer backups affecting a few members. LARM continues to encourage and recognize the importance of good loss control with effective sewer maintenance. One of LARM’s customers sets the bar for best practices in sewer maintenance. Norfolk’s Water and Sewer Maintenance Director

SEPTEMBER 2015 | PUBLIC RISK

Sewer Backup Coverage Dennis Watts indicates that Norfolk’s annual sewer maintenance program includes all residential sewers and interceptors. Between April and November, sewers are cleaned with a high pressure jet and vacuum combination truck, which is jointly purchased with the Street Division and is also used for storm sewer maintenance.

CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.

WEBINARS 2015 • September 16 – Social Media Horror Stories: Don’t Become One! • November 18 – Employment Practices Liability: Mitigating Risks

PRIMA ANNUAL CONFERENCES June 5–8, 2016 PRIMA 2016 Annual Conference Atlanta, GA Hyatt Regency Atlanta June 4–7, 2017 PRIMA 2017 Annual Conference Phoenix, AZ Phoenix Convention Center June 3–6, 2018 PRIMA 2018 Annual Conference Indianapolis, IN Indiana Convention Center

Each of Norfolk’s sanitary sewer sections is flushed from manhole to manhole. Once enough material is collected in the manhole, maintenance crews vacuum the material out. Footage cleaned between manholes, the date and operator, and any deficiencies are recorded. Certain low areas of the collection system are inspected quarterly, monthly and weekly, and the inspections are recorded. Water and sewer crews have purchased inexpensive camera systems that are affixed to Styrofoam floats and used to inspect and video the sewer mains when needed. Norfolk’s 14 lift stations are physically inspected, Monday and Thursday of each week. Operation of the pumps, stations alarms and system controls are checked for proper operation. Two portable generators are available to use at the lift stations in the event of a power outage. Norfolk has adopted the International Code Council’s model building code that requires backflow prevention technology in all new construction. If an existing structure needs to replace the existing sewer service line owners are required to install a backflow protection device. Norfolk encourages existing homeowners to retrofit the technology in their residences. Additionally, Norfolk recently developed a “Drain Campaign” to inform citizens to not clog drains with paper, objects or grease. The program involves press releases, public posters and staff presentations to public and parochial school children, parents and civic groups about how grease, paper towels, wipes, feminine products, prescription drugs and leftover cleaning supplies can plug sewers and the cost to homeowners and the municipality. Norfolk’s sewer maintenance program represents exceptional attention-to-detail that defense attorneys value because good management is always the best mitigation against lawsuits. While smaller municipalities may be unable to fund their own equipment and staff for sewer maintenance and code enforcement, many private contractors are available throughout Nebraska to provide these services to small communities. Also, the Interlocal Cooperation Act is an additional option that authorizes smaller municipalities to contract with other local government subdivisions for these services.

ENTERPRISE RISK MANAGEMENT: APPLYING THE ISO 31000 STANDARD

Good risk management is fundamentally about good management. In excluding sewer backups from general liability coverage and affording coverage by endorsement at low limits and high deductibles, the LARM board understood that the effect would be to foster good management of sewer collection systems and maintenance. The results have improved loss control and savings for LARM members.

Intro Workshop Dates & Locations September 29 – Savannah, GA

Michael Nolan is the executive director of the League Association of Risk Management.

Implementation Workshop Dates & Location November 18 & 19 – Savannah, GA

PRIMA INSTITUTE November 4–6, 2015 Albuquerque, NM

PUBLIC RISK | SEPTEMBER 2015

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CLAIMS AGAINST

CORRECTIONS:

THE PUBLIC RISK MANAGEMENT CHALLENGE

By Joe Jarret

f there is one constant in the world of corrections risk management, it is that inmates’ rights are closely guarded by a complex, comprehensive body of federal, state and constitutional law. How corrections officers conduct themselves often translates into liability for public entities in the

corrections business. Recently, the U.S. Supreme Court issued a ruling that has caught the attention of plaintiffs’ attorneys and one that should likewise cause public risk managers to stand up and take notice. Specifically, the ruling in Kingsley v. Hendrickson1, which will be explored more fully below, addressed the rights of detainees—those individuals awaiting trial and, as such, have not been adjudicated guilty of violating the law—as compared to prison or jail inmates. The risk management implications of this ruling could translate into increased excessive use of force claims, while making it easier for pre-trial detainees to file such claims.

PUBLIC RISK | SEPTEMBER 2015

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INMATE LAWSUITS When an inmate alleges she or he has suffered an indignity at the hands of corrections officers, lawsuits inevitably follow. Plaintiff’s attorneys who specialize in filing claims against correctional facilities enjoy a wide variety of causes of actions upon which to base their lawsuits. Some of these causes of action include: • Deprivation of civil rights • Negligence in ownership, operation, maintenance, supervision and security of the correctional facility. • Negligent hiring of personnel • Negligent retention of personnel • Medical neglect—Failing to diagnose and treat serious conditions, withholding necessary medication • Assault—Beatings by jail personnel, failure to segregate violent inmates, failure to respond to complaints of physical abuse or sexual assault • Cruel and unusual punishment—Withholding food or medical assistance, excessive restraints, retaliation for reporting abuse, sexual exploitation, unauthorized punishment meted out by staff • Mental illness—Failure to protect emotionally disturbed inmates from themselves or predatory cellmates; failure to provide psychiatric care and suicide prevention measures • Understaffing/failure to monitor—Failure to provide the mandated level of supervision under state law • Excessive use of force.

INMATES VERSUS DETAINEES It is important to note that our courts make a distinction between inmates and detainees when it comes to claims founded in excessive use of force. Generally, an inmate is defined by our courts to mean a person who is deprived of personal liberty against his or her will following conviction of a crime. A detainee, on the other hand, is a person who is confined in a correctional facility (usually awaiting trial or a bail hearing) even though she or he has not yet been convicted of a crime. While inmates are afforded certain protections under the Eighth Amendment of the Constitution2 against cruel and unusual punishment, the Eighth Amendment does not govern or apply to individuals being held in pre-trial detention. Rather, detainees are protected under the 14th Amendment’s right to substantive due process of law.3 In a nutshell, substantive due process requires all governmental intrusions into fundamental rights and liberties to be fair and reasonable and in furtherance of a legitimate governmental interest. The distinction between claims filed by inmates as compared to detainees came to a head recently in the case of Kingsley v. Hendrickson. In this case, after being arrested and taken to pre-trial detention, Michael Kingsley refused

to remove a piece of paper covering a light fixture in his cell, despite being repeatedly ordered to do so. Ultimately four officers approached the cell and ordered Kingsley to stand, back up to the door and keep his hands behind him. When Kingsley refused to comply, the officers handcuffed him, forcibly removed him from the cell, carried him to a receiving cell and placed him face down on a bunk with his hands handcuffed behind his back. While the details of what happened next remained partly in dispute, Kingsley alleges that he did not significantly resist the corrections officers and that the officers slammed his head into a concrete bunk. Further, that the officers used a Taser on Kingsley for several seconds, even though he was handcuffed and lying face down. Based on these and related events, Kingsley filed a §19834 complaint in Federal District Court claiming (among other things) that corrections officers used excessive force against him, in violation of the Fourteenth Amendment’s Due Process Clause. The United States Supreme Court held 5-4 that to prove an excessive force claim against a corrections officer, a pretrial detainee does not need to show that the officers were subjectively aware that their use of force was unreasonable. Rather, she or her need only show that the force purposely or knowingly used against her or him was objectively unreasonable to prevail on an excessive force claim. This determination must be made from the perspective of a reasonable officer on the scene, including what the officer knew at the time. This is a break from previous rulings that required such claims to be analyzed through the lens of a subjective standard that is more deferential to law enforcement. Essentially, the subjective standard is what the person accused of violating a detainee’s rights actually believed, or had knowledge of, at the time. This can be inferred from facts including things they said, their demeanor, or prior history. The objective standard, on the other hand, is a determination of what a reasonable person under similar circumstances would have believed, as determined by a judge or a jury. In other words, when filing an excessive use of force claim against a corrections facility, a detainee need only demonstrate that the corrections officer’s use of force was objectively unreasonable. Despite its ruling in Kingsley, the Supreme Court left intact, the defense of qualified immunity, which shields government officials from liability for the violation of an individual’s federal constitutional rights while such officers are performing discretionary functions and where their actions did not violate clearly established law.5

It is important to note that our courts make a distinction between inmates and detainees when it comes to claims founded in excessive use of force. Generally, an inmate is defined by our courts to mean a person who is deprived of personal liberty against his or her will following conviction of a crime. A detainee, on the other hand, is a person who is confined in a correctional facility (usually awaiting trial or a bail hearing) even though she or he has not yet been convicted of a crime.

PROTECTING YOUR ENTITY The savvy risk manager will tell you that correctional institutions provide unique challenges, risks and exposures unlike those found in any other public entity. This is due in part to the fact that a correctional institution is a residential setting that confines some of society’s most

SEPTEMBER 2015 | PUBLIC RISK

Claims Against Corrections: The Public Risk Management Challenge • Soft hand techniques • Soft and hard hand techniques including pepper spray or Tasers if authorized • And, as a last resort, deadly physical force (DPF)

dangerous, threatening individuals. The populations of such institutions are diverse and experience frequent turnover in both residents and staff. Further, inmates exhibit a wide range of behavior—from compliant to violent, expressing varying degrees of cooperation with corrections officers. Finally, correctional institutions must take inmates as they find them and they often find them to have significant health and personal needs. Adding to this challenge is the fact that a correctional institution is a complex one, supported by a complex infrastructure (including the physical plant, security system, lifeline services, staff, policies and procedures, food service, health care, social services and opportunities for inmates’ self-improvement) which must work collaboratively and smoothly lest the system fails. System failure can lead to a host of negative consequences, including, but limited to: • The increased likelihood of inmate escape and resultant public harm; • Injuries to inmates and correctional staff because of unsafe conditions; • The victimization of corrections staff at the hands of inmates who have been improperly classified or inadequately controlled; • Damage to the facility; • Failure to provide a level of inmate care that complies with constitutional, statutory and regulatory requirements.6 All of the above provide a breeding ground for claims asserted against the facility. Further, detainees can provide as great a risk or greater risk than inmates (especially if they are new to the criminal justice system) and as such, it is suggested that the same use of force continuum in place to subdue inmates be applied to detainees. In general, the risk manager should work with corrections staff in training corrections officers to escalate force starting with: • Officer presence • Verbal command

PUBLIC RISK | SEPTEMBER 2015

Needless to say, all of the above risks and potential liabilities demand that a correctional facility have in place a viable risk management protocol. As suggested by Martin & Reeves,7 such a program serves the following purposes: • Demonstrates the jail administrator’s support of risk management to jail staff, the funding authority, the community, insurers and partner organizations. • Provides a systematic and consistent process for incorporating risk management into the jail’s activities and planning process. • Clearly assigns responsibility and accountability for risk management. • Promotes a culture of risk management throughout the jail. • Improves the allocation of resources. • Establishes goals and performance indicators to measure and demonstrate the success of risk management efforts. • Provides a risk management reference source for staff. In light of the Supreme Court’s ruling in Kingsley v. Hendrickson, a correctional facility’s detainee protocols will in all probability come under greater scrutiny from the courts and plaintiffs’ attorneys. Risk managers must likewise purpose to work with corrections staff to insure that the due process rights of detainees are protected through officer training and a solid, proactive, risk management program. Joe Jarrett is an attorney, mediator and former public risk manager who serves the University of Tennessee, Department of Political Science as a lecturer. FOOTNOTES 1 Kingsley v. Hendrickson, 135 S.Ct. 1039 (2015). 2 The Eighth Amendment to the United States Constitution reads: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” 3 Section I of the 14th Amendment to the U.S. Constitution provides in pertinent part that “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” 4 Section 1983 refers to 42 U.S.C. §1983, the federal statute that enables an aggrieved person to file a civil action for deprivation of constitutional and federal statutory rights by persons acting under “color of law.” 5 Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971). 6 See Martin & Reiss, Managing Jail Risk, 2008. 7 Id at 36.

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Has your entity launched a successful program? An innovative solution to a common problem? A money-saving idea that kept a program under-budget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

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SEPTEMBER 2015 | PUBLIC RISK

Member Spotlight

CITY OF COLLEGE STATION MAKES RISK MANAGEMENT A “FORM”ALITY Each month, Public Risk features a member who has gone above and beyond in a feature column titled “Member Spotlight.” Do you know someone who deserves recognition, has made a contribution or excelled in their profession? If so, we’d like to hear from you for this exciting column, as PRIMA shines the spotlight on its members. To be considered for the Member Spotlight column, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

he City of College Station, Texas, like many entities, found itself incurring a significant yearly expense to repair or replace damaged city property. Losses generally included motor vehicle accidents, criminal mischief, vandalism, utility meter tampering and contractor negligence. But in 2014, the city was able to recover more than $217,000 of public funds through subrogation, restitute and recovery from individuals responsible for loss, damage or defacement of city property. The City of College Station’s Risk Management Loss Prevention Program, which established a uniform reporting system for incidents that resulted in damage to city property, was the catalyst for the increase in recovered funds. At the heart of the loss prevention program is the Work Incident Report Form 105, which replaced multiple reporting forms that city employees used to report work-related incidents. Also, prior to the program, property damage claims were not entered into the third-party administrator’s (TPA) claims tracking system. The new, streamlined process allowed College Station’s risk management department to track all property damage, including the cost of materials, equipment and labor. “With the cooperation of other departments, risk management invoices individuals who cause damage, file restitution

“

Youell explains that all property and casualty losses are paid from the Property Casualty Fund, which is contributed to by each department based on claims experience. All recovered amounts go back to the fund to ensure adequate reserves. “Just like all changes, this program was met with resistance at first,” said Youell. “Employees were sometimes reluctant to write out statements related to what they were doing when the damages occurred, how they encountered the damage or what they were doing when the damage occurred. Now it has become routine to ‘fill out the 105’ any time damage occurs.” Youell said that the development of the form took a couple of one-hour meetings and field testing, but the long-term results have been well worth the time. She also credits Risk Claims Coordinator Dee Dee Vargas with ensuring the process goes smoothly. For more information on the City of College Station’s Risk Management Loss Prevention Program, contact Retha Youell at ryouell@cstx.gov.

With the cooperation of other departments, risk management invoices individuals who cause damage, file restitution claims with the county attorney’s office and file liability claims with our insurer… a monthly claim review system allows us to track progress on recovering losses.

“

claims with the county attorney’s office and file liability claims with our insurer,” said Retha Youell, risk and workforce compliance manager. “A monthly claim review system allows us to track progress on recovering losses.”

PUBLIC RISK | SEPTEMBER 2015

Retha Youell, risk and workforce compliance manager

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