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Home My WebLink About9D - Tort Liability Limits ~/NNESO~~ MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: DECEMBER 18, 2000 9D 00 -/30 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 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 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 adjusted losses during the past 14 years have amounted to a total of $486,446 or an average of less than $35,000 per year. This includes property loss as well as liability claims. The City has never incurred an insurance eligible claim in excess of its standard policy limits. Current Circumstances As stated on the waiver form, cities obtaining coverage from the LMCIT must decide whether or not to waive the statutory tort liability limits. 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 is 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. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER H:IAGENDAIAOOO4.doc 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. The "advantage" of the waiver option, from the perspective of a Prior Lake resident, is that the individual or family could be awarded a more "just 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 $4,000.00 annually. In the past staff 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 cost for excess liability insurance is very expensive and would be in excess of $25,000. Because of the excessive cost, the City has not elected this insurance coverage provision in previous 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 coverages will increase our costs. More over 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: [".....................................................................................................[......Ap.p.roxlm.atc..pre.mlu.m..Cost.....] I:::~~~;~t~~~~~f~![~~~~~~~~~~:]::::::.::::.::.::::::.::::.:::::..:::.:.~!~~~~::::::::.::::::::::.::..::::::::::.:::::1 The LMCIT underwrites virtually all the city insurance needs in the metro seven county area. According to the League, the majority of cities (52%) do not waive the municipal tort liability monetary limits and most (75%) decline the excess liability coverage as well. AL TERNA TIVES: 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. H:IAGENDAIAOO04.doc RECOMMENDED MOTION: REVIEWED BY: Attachments: H:IAGENDAIAOOO4.doc 2. Modify the resolution to incorporate the optional Insurance coverages as desired by the City Council. ior Lake City Council. 1. Resolu . n lecti g the Non Waiver of Statutory Municipal Tort Liability . its and Declining Excess Liability Insurance Coverage 2. LMCIT Liability Coverage - Waiver Form RESOLUTION OO-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: The City of Prior Lake DOES NOT WAIVE the monetary limits on municipal X tort liability established by Minnesota Statutes 466.04. X The City of Prior Lake declines excess liability coverage. Passed and adopted this 18th day of December, 2000. YES NO Mader Ericson Gundlach Petersen Zieska Mader Ericson Gundlach Petersen Zieska {Seal} City Manager City of Prior Lake 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER H: IINSURANClResins.doc "'--'--'-'--".'--"--r--" LMCIT LIABILITY COVERAGE - WAIVER FORM Cities obtaining liability coverage from the League of Minnesota Cities Insurance Trust must decide whether or not to waive the statutory tort liability limits to the extent of the coverage purchased. The decision to waive or not to waive the statutory limits has the following effects: . , 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 tort limits apply. The total which all claimants would be able to recover for a single occurrence to which the statutory tort limits apply would be limited to $1,000,000. These statutory tort limits would apply regardless of whether or not the city purchases the optional excess liability coverage. . If the city waives the statutory tort limits and does not purchase excess liability coverage, a single claimant could potentially recover up to $1,000,000. on a single occurrence. The total which all claimants would be able to recover for a single occurrence to which the statutory tort limits apply would also be limited to $1,000,000., regardless of the number of claimants. . If the city waives the statutory tort limits and purchases excess liability coverage, a single claimant could potentially recover an amount up to the limit of the coverage purchased. The total which all claimants would be able to recover for a single occurrence to which the statutory tort limits apply would also be limited to the amount of coverage purchased, regardless of the number of claimants. Claims to which the statutory municipal tort limits do not apply are not affected by this decision. This decision must be made by the city council. Cities purchasing coverage must complete and return this form to LMCIT before the effective date of the coverage. For further information, contact LMCIT. You may also wish to discuss these issues with your city attorney. The City of accepts liability coverage limits of $ Minnesota Cities Insurance Trust (LMCIT). from the League of Check one: _ The city DOES NOT WAIVE the monetary limits on municipal tort liability established by Minnesota Statutes 466.04. _ The city WAIVES the monetary limits on tort liability established by Minnesota Statutes 466.04, to the extent of the limits of the liability coverage obtained from LMCIT. Date of city council meeting Signature Position Return this completedform to LMClT, 145 University Ave. W., St. Paul, MN. 55103-2044 Page 1 of 1