The URL can be used to link to this page

Home My WebLink About5C - Tort Liability Limits 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DECEMBER 1, 2003 5C RALPH TESCHNER, FINANCE DIRECTOR CONSIDER APPROVAL OF A RESOLUTION ELECTING THE NON WAIVER OF STATUTORY MUNICIPAL TORT LIABILITY LIMITS AND DECLINING EXCESS LIABILITY INSURANCE COVERAGE DISCUSSION: Introduction The City of Prior Lake participates in the League of Minnesota Cities Insurance Trust (LMCIT) for the purpose of securing its liability, property, casualty, auto and workers compensation insurance coverage. As a condition of insurance policy renewal the City must annually execute the enclosed "LMCIT Liability Coverage Waiver Form" and: 1. Determine whether it wishes to waive the statutory liability limits; and 2. Determine if it wishes to acquire excess liability insurance coverage. History We have been insured by the LMCIT since 1987. On a business exposure basis the City has incurred relatively few claims with the overall dollars being fairly low. Our aggregate liability losses during the past 17 years have amounted to a total of $745,821 or an average of less than $45,000 per year. The City has never incurred an insurance liability eligible claim in excess of its standard policy limits of $300,000 that is consistent with statutory tort limits. Current Circumstances Annually the City is asked by the LMCIT if it wishes to waive the statutory tort limits as outlined below. If the city does not waive the statutory tort limits, an individual claimant would be able to recover no more than $300,000 on any claim to which the statutory limits apply. A tort is a civil wrong whereby an injured party may be entitled to compensation. If the city waives the statutory tort limits, a single claimant could potentially recover up to $1,000,000 on a single occurrence under our policy limits or beyond. The bottom line is the Council must decide if it wishes to allow a higher recovery amount if an individual were successful under a tort liability claim against the City. www.cityofpriorlake.com H:\Insurance\Lmcitwaiver.doc Phone 952.447.4230 / Fax 952.447.4245 The "advantage" of the waiver option, from the perspective of a Prior Lake resident, is that the individual or family could be awarded a higher settlement in a particularly egregious suit. The obvious disadvantages are that the City would incur higher liability exposure if it was to waive the statutory limits plus our liability insurance premium would increase. The cost would be about 3 Y2% of our base liability premium or approximately $3,600.00 annually. In the past the council has declined waiving the statutory monetary limits because it would just encourage larger settlements and drive up our insurance premium costs which our taxpayers ultimately pay. Also available to the City, as optional coverage, is what is known as excess liability insurance that provides an additional $1,000,000 of liability insurance over and above our standard one million dollar policy limit on non-tort claims. This additional coverage basically acts as an umbrella and would provide the City additional insurance protection for claims that would be exempt from statutory tort limits. The added cost for excess liability insurance is very expensive and would be in excess of $24,000 annually. Because of the excessive cost, the City has not elected this insurance coverage ... . provlslOn m prevlOus years. ISSUES: Acceptance of the higher tort limit or acquisition of excess liability insurance will increase the likelihood that claims will be made above the normal limits. The premiums for the additional coverage will increase our costs. Moreover if a claimant is successful in recovering greater damages under the higher limits, future premium costs will escalate. FINANCIAL IMPACT: Summarized in the table below is the increase in insurance premium costs associated with either of the above elections: ~"""""'"''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''....................................................................................................................................... i i Annual Premium Cost Increase i [~~~J.~..~~~~~t~~E~~f.~~~~~:~~::::r::::::::::::::::::::::::::::::::::::::::$.~l4~6~::::::::::::::::.::.:::::::::::::.:::::::] The LMCIT underwrites virtually all the city insurance needs in the metro seven county area. According to the League, the majority of cities, (65%), do not waive the municipal tort liability monetary limits and most (73%) decline the excess liability coverage as well. ALTERNATIVES: The following alternatives are available to the City Council: 1. Approve Resolution Electing The Non Waiver of Statutory Municipal Tort Liability Limits and Declining Excess Liability Insurance Coverage. 2. Modify the resolution to incorporate the optional insurance coverage as desired by the City Council. H:\Insurance\Lmcitwaiver,doc RECOMMENDED MOTION: REVIEWED BY: Attachments: H:\Insurance\Lmcitwaiver,doc Alternative #1 to be adopted as part of the consent agenda. From a financial and liability pers tive, the taxpayer is better served by retaining the statutory lim' 1. Resoluti lecting the Non Waiver of Statutory Municipal Tort Liability Limits and Declining Excess Liability Insurance Coverage 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION 03-XX RESOLUTION ELECTING THE NON WAIVER OF STATUTORY MUNICIPAL TORT LIABILITY LIMITS AND DECLINING EXCESS LIABILITY INSURANCE COVERAGE MOTION BY: SECOND BY: WHEREAS, The City of Prior Lake has the option of waiving the monetary limits on municipal tort liability by Minnesota Statutes 466.04; and WHEREAS, The League of Minnesota Cities Insurance Trust offers the additional insurance coverage of excess liability insurance; and WHEREAS, The Prior Lake City Council has evaluated the benefits of these optional insurance coverages in addition to their cost impacts; and WHEREAS, The City of Prior Lake has exhibited historically relatively low claims experience. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that the City of Prior Lake hereby exercises the following elections with respect to the available LMCIT insurance options: X The City of Prior Lake DOES NOT WAIVE the monetary limits on mnnicipal tort liability established by Minnesota Statutes 466.04 effective for 2004 policy year. x The City of Prior Lake declines excess liability coverage effective for 2004 policy year. Passed and adopted this 2nd day of December, 2002. YES NO Haugen Blomberg LeMair Petersen Zieska Haugen Blomberg LeMair Petersen Zieska {Seal} City Manager City of Prior Lake www.cityofpriorlake.com H: \Insurance\Lmcitwaiverresolution.doc Phone 952.447.4230 / Fax 952.447.4245