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Home My WebLink AboutItem 06.fDecember 2, 2019 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 2020 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 $9,146 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 $77,704 annually if we choose not to waive tort liability limits and $114,590 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 $ 9,146 Excess Liability Coverage $ 77,704 $114,590 Total $ 77,704 $123,736 *Based on 2019 premiums; Amounts would change when 2020 premiums are calculated. LIABILITY COVERAGE – WAIVER FORM Members who obtain liability coverage through the League of Minnesota Cities Insurance Trust (LMCIT) must complete and return this form to LMCIT before the member’s effective date of coverage. Return completed form to your underwriter or email to pstech@lmc.org. The decision to waive or not waive the statutory tort limits must be made annually by the member’s governing body, in consultation with its attorney if necessary. Members who obtain liability coverage from LMCIT must decide whether to waive the statutory tort liability limits to the extent of the coverage purchased. The decision has the following effects: • If the member does not waive the statutory tort limits, an individual claimant could recover no more than $500,000 on any claim to which the statutory tort limits apply. The total all claimants could recover for a single occurrence to which the statutory tort limits apply would be limited to $1,500,000. These statutory tort limits would apply regardless of whether the member purchases the optional LMCIT excess liability coverage. • If the member waives the statutory tort limits and does not purchase excess liability coverage, a single claimant could recover up to $2,000,000 for a single occurrence (under the waive option, the tort cap liability limits are only waived to the extent of the member’s liability coverage limits, and the LMCIT per occurrence limit is $2,000,000). The total all claimants could recover for a single occurrence to which the statutory tort limits apply would also be limited to $2,000,000, regardless of the number of claimants. • If the member 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 could 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. 2 LMCIT Member Name: __________________________________________________________________________ Check one: o The member DOES NOT WAIVE the monetary limits on municipal tort liability established by Minn. Stat. § 466.04. o The member WAIVES the monetary limits on municipal tort liability established by Minn. Stat. § 466.04, to the extent of the limits of the liability coverage obtained from LMCIT. Date of member’s governing body meeting: _____________________________________________ Signature: Position: ________________________________ 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 2020 policy year. 2. The City of Lakeville declines excess liability coverage effective for the 2020 policy year. ADOPTED by the Lakeville City Council this 2nd day of December 2019. CITY OF LAKEVILLE ___________________________ Douglas P. Anderson, Mayor _____________________________ Charlene Friedges, City Clerk