HomeMy WebLinkAboutItem 06.iDecember 7, 2020 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
2021 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 $8,099 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.
Very few 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 $66,045 annually if we choose not to waive tort liability limits and
$81,896 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 $ 8,099
Excess Liability Coverage $ 66,045 $81,896
Total $ 66,045 $89,995
*Based on 2020 premiums; Amounts would change when 2021 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 2021 policy year.
2. The City of Lakeville declines excess liability coverage effective for the
2021 policy year.
ADOPTED by the Lakeville City Council this 7th day of December 2020.
CITY OF LAKEVILLE
________________________________
Douglas P. Anderson, Mayor
_____________________________
Charlene Friedges, City Clerk
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: ________________________________