HomeMy WebLinkAboutItem 06.eDecember 3, 2018 Item No.
ELECTION OF NON-WAIVER OF STATUTORY MUNICIPAL TORT LIABILITY LIMITS
AND DECLINING EXCESS LIABILITY INSURANCE COVERAGE
Proposed Action
Staff recommends adoption of the following motion as part of the Consent Agenda: Move to
approve Resolution Electing the Non-Waiver of Statutory Municipal Tort Liability Limits and
Declining Excess Liability Insurance Coverage.
Overview
The City of Lakeville participates in the League of Minnesota Cities Insurance Trust (LMCIT) for
securing its liability, property, casualty, automobile and workers compensation insurance
coverage. As a consideration of insurance policy renewal, the City must annually execute an
“LMCIT Liability Coverage Waiver Form” and:
1. Determine whether to waive the statutory liability limits; and
2. Determine whether to acquire excess liability insurance coverage.
Primary Issues to Consider
• Statutory Tort Limits and Excess Liability Coverage
• Cost
Supporting Information
• Resolution
Financial Impact: $ Budgeted: Y☐ N☒ Source:
Related Documents: (CIP, ERP, etc.):
Envision Lakeville Community Values: Good Value for Public Services
Report Completed by: Jerilyn Erickson, Finance Director
0-
Various Funds
2019 Budget
PRIMARY ISSUES TO CONSIDER
If the City does not waive the statutory tort limits, an individual claimant would be able to
recover no more than $500,000 on any claim to which the statutory limits apply. The total all
claimants would be able to recover for a single occurrence to which the statutory tort limits apply
would be limited to $1,500,000. These statutory tort limits apply regardless of whether the City
purchases the optional excess liability coverage. A tort is a civil wrong whereby an injured party
may be entitled to compensation.
If the City waives the statutory tort limits and does not purchase excess liability coverage, a
single claimant could potentially recover up to $2 million for a single occurrence. (Under this
option the tort cap liability limits are waived to the extent of the member’s liability coverage
limits, and the LMCIT per occurrence limit is $2 million.) The total all claimants would be able
to recover for a single occurrence to which the statutory tort limits apply would also be limited to
$2 million, 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 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.
For coverage written or renewed on or after November 15, 2014 LMCIT’s liability coverage will
provide a limit of $2 million per occurrence. The LMCIT is providing higher coverage limits
than the statutory limit to give member cities better protection. The statutory liability limit caps
the City’s liability for many types of claims, but some liability claims aren’t covered by the
statutory limit, so the City’s potential liability is unlimited. The higher limit also protects against
a major incident in which many people might be injured. Another reason to provide higher
limits is because it is increasingly more common to see contracts requiring more than the
statutory limit of $1.5 million; a more common figure is the $2 million limit.
The bottom line is the Council must decide if it wishes to allow a higher recovery amount if an
individual was successful under a tort liability claim against the City. The advantage of the
waiver option is that it allows in some cases for a claimant with a legitimate claim to recover
more of their actual damages. The disadvantage is that the City’s liability exposure is greater if it
waives the statutory limits and the City’s liability insurance premium would increase. The cost to
waive the statutory limits would be about 3.5% of our base liability premium or approximately
$9,508 annually. In the past the Council has declined waiving the statutory monetary limits
because it increases the amount available to award to a successful plaintiff, it may encourage
larger settlements and it drives up the City’s insurance premium. About 18% of the cities insured
by LMCIT have chosen to waive the statutory tort limits.
Also available to the City as optional coverage is what is known as excess liability insurance that
provides an additional $1 million of liability insurance over and above the $2 million 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 approximately
$84,782 annually if we choose not to waive tort liability limits and $125,518 if we choose to waive
the limits. Because of the cost the City has not elected this insurance coverage provision in
previous years.
Cost
Estimated Annual Premium
Cost Increase*
Non-Waiver Waiver
Primary Coverage $ 0 $ 9,508
Excess Liability Coverage $ 84,782 $ 125,518
Total $ 84,782 $135,026
*Based on 2018 premiums; Amounts would change when 2019 premiums are calculated.
CITY OF LAKEVILLE
RESOLUTION NO. _________
ELECTION OF NON-WAIVER OF STATUTORY MUNICIPAL TORT LIABILITY LIMITS AND
DECLINING EXCESS LIABILITY INSURANCE COVERAGE
WHEREAS, Minnesota Statutes 466.04 imposes limits on municipal tort liability; and
WHEREAS, The City of Lakeville has the option to waive the protection of statutorily imposed
limits on what a claimant can recover in a tort liability action; and
WHEREAS, The League of Minnesota Cities Insurance Trust offers municipalities the option to
purchase excess liability insurance; and
WHEREAS, The Lakeville City Council has evaluated whether to waive the limit on tort liability
and whether to purchase excess liability coverage for non-tort claims.
NOW THEREFORE, BE IT RESOLVED, that the City of Lakeville hereby exercises the
following elections with respect to the available LMCIT insurance options:
1. The City of Lakeville DOES NOT WAIVE the monetary limits on municipal
tort liability established by Minnesota Statutes Section 466.04 effective for the
2019 policy year.
2. The City of Lakeville declines excess liability coverage effective for the 2019
policy year.
ADOPTED by the Lakeville City Council this 3rd day of December 2018.
CITY OF LAKEVILLE
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Douglas P. Anderson, Mayor
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Charlene Friedges, City Clerk