By Wallace L. Clapp, Jr., CPCU
Still in the midst of a period of lowered rates, higher limits and greater coverage, the domestic insurance property-casualty insurance industry has met the challenge of municipal pools and provides a wide variety of markets for independent agents and brokers who are agents and advisors to cities and towns. Although the nation's largest cities self-insure most liability risks for municipal services for SIRs of $250,000 up to $1 million, there are still many towns or villages below 50,000 population that are insured under standard or special property-casualty packages.
According to the National League of Cities (www.nlc.org/nlc-prog.html), their direct membership includes 49 state municipal league organizations representing more than 17,600 communities. Eighty-three percent of the nation's municipalities with populations greater than 100,000 are members of NLC, but more than 75% of NLC's direct members have populations less than 50,000.
Therefore, politically active agents often can harvest a slice of this profitable municipal insurance market. Insurance on most of the services that the municipality provides its residents and business persons is usually a part of the overall property and liability program written for the community.
Under early case law in the U.S. courts, municipalities could not be sued. Through the years this concept was gradually eroded. By 1978, municipalities were sued, and a precedent U.S. Supreme Court decision further established that a municipality could be liable under the federal court system.
A case written up in "The Quorum," Vol. 1, No. 2, October, 1996, published quarterly for insurance agents and insureds by Apex Insurance Agency, cited the case of Monell v. Department of Social Services [436 U.S. 658 (1978)] establishing municipal liability under Section 1983 of Title 42 of the U.S. Code. This was originally titled the "Civil Rights Act of 1871." The article goes on to state that "in 18 years since this decision, courts have allowed plaintiffs to show the existence of a 'policy' sufficient to impose section 1983 liability on a municipal government in many different ways: (1) actions by municipal legislative bodies; (2) actions by municipal agencies or boards; and (3) the actions of people with final decision-making authority in the municipality."
Stripped of most immunity from both state and federal courts, municipalities have had to be very careful in the conduct and operations of municipal services. Liability--both general, auto and professional--is a most important keystone to the community's insurance program.
Virtually every entity under the umbrella of the municipality furnishes services available to residents. Law enforcement agencies and officers, public officials, public employees in the streets, water and sanitation departments or districts, parks and recreation departments, firefighters, emergency medical and assistance services, EMTs, 911 dispatch services are examples of key services available to the public.
The city may be liable for services rendered by public hospitals, airport authorities, public utilities, transit authorities and housing authorities, public stadiums and auditoriums, and schools. Policies generally are written for the municipality's liability as well as professional liability of public officials, law enforcement officers, firefighters, emergency personnel, school boards and school teachers in public schools. Some underwriters cover insurance on many of these services under a combined policy, while others write law officers, public officials, EMTs on separate covers.
Major concerns
Rapidly developing civil rights cases have been brought on by extensions of the original Civil Rights Act (Section 1983) such as the federal Civil Rights Act of 1991, the Americans with Disabilities Act and the Age Discrimination in Employment Act (ADEA).
Employment-related claims have been the fastest growing area of civil rights legislation. It is estimated that such claims amounted to about 35% of all claims filed against public officials. Most policies covering public officials have built-in coverage for wrongful acts in violation of any federal, state or local civil rights statutes. This encompasses all of the previously mentioned employment-related legislation as well as civil rights of residents and visitors to the city.
Fired employees often claim that their discharge violated some contractual or statutory right, or was based on factors such as race, sex, disability or age. Other claims may be because the employer created intolerable working conditions forcing the employee to resign (sexual harassment). A demotion also can be construed as a constructive discharge, especially where the demotion is essentially a career-ending action.
Another concern for municipalities is loss exposures from environmental hazards existing in municipal properties or brought about by services rendered by municipalities. For example, a circular from The Indiana Association of Cities and Towns warns of the concern for the registration of underground storage tank (UST) systems owned by municipalities. It is important to be aware of systems installed prior to 1988 so that proper precautions can be made to prevent spills and overfills. Tanks that are removed must go through complete closure procedures.
Another circular raises concerns about the environmental safety of playground equipment in Indiana cities and towns. Much of the older metal playground equipment in Indianapolis evidenced unsafe levels of lead-based paint, and the city decided to remove each piece of equipment containing unsafe levels of lead content.
Other environmental loss exposures come from landfills, waste treatment, storm water drainage and drinking water. Cities are required by the Clean Water Act to prevent industry from polluting water and storm sewer systems and are legally liable for their failure to do so. Major federal anti-pollution laws (the Clean Air Act, Clean Water Act, CERCLA, the Resource Conservation and Recovery Act and amendments to Superfund) eliminate any municipal immunities.
Redevelopment of certain areas of urban land scheduled for "brownfield sites" exposes the city if it is the owner of the land until the property can be developed and title transferred to a private party. The city of Indianapolis is building a new arena on land that was tested and found to be permeated with oil. The top layers of this soil must be transported to another site for treatment prior to its use again. Will this "environmental hazard" taint another neighborhood where it is deposited during construction?
Another concern of city governments and agencies is the potential liability from claims related to adoption agencies and other social service agencies. The country is increasingly focusing on the failure of public agencies to recognize and prevent the abuse of children.
Departments of correction and police are potentially major sources of losses for local governments. Claims include allegations of unreasonable search and seizure, the use of excessive force in arresting persons, malicious prosecution and abuse of process.
Special events such as fireworks, fairs, festivals and parades require considerable risk management and control to assure the well-being of all spectators and participants. The liability to spectators at municipally owned parks and sports arenas is a major concern. Safety is imporant on parks department playgrounds, swimming pools and beaches and in parks or on trails developed for hiking and bicycling.
Insurance coverages needed
The principal insurance coverage needed by municipalities and other public entities to cover the operations of essential services is the general liability policy. Usually, this coverage is furnished in conjunction with the public official liability policy, which covers the governmental entity, as well as elected, appointed and employed officials, members of commissions, boards or other units operated under the municipality, employees, volunteers, and service providers.
This policy applies to claims against the insured for "wrongful acts" rendered in discharging duties on behalf of the public entity named in the Declarations. Most insurers writing municipalities and public officials today have extended coverage to include coverage for violation of federal, state or local civil rights laws.
Some insurers incorporate employer-related practices liability in the policy; others issue separate endorsement or separate policies. The general liability provides bodily injury, property damage and personal injury liability coverage.
Law enforcement liability may be incorporated in the general liability policy or written as a separate endorsement or policy. Most insurers specializing in municipal liability have updated their forms to include coverage for intentional acts, violation of civil rights, and assault and battery.
Policies for firefighters and emergency service providers, ambulance and rescue squads, EMTs and community special transportation providers are available if other general, auto and professional liability policies do not fit the needs of the insured.
Abundant markets available
We have surveyed the market and have received descriptions of municipal services liability coverage from a number of insurers and program managers. Listed below are the pertinent features of the liability programs and the name of a contact person for each program.
The American Agency, Inc., 7800 College Blvd., Ste. 203, P.O. Box 12070, Overland Park, KS 66282-2070; (913) 661-0123; 800-255-4301; FAX 913-451-3183 (Howard J. Handler, President). This managing general agency has written an emergency service provider protection insurance program since the 1970s. The plan was first developed by the National Association of Emergency Medical Technicians. The agency is recognized as a leader in the field of EMS provider insurance.
The program provides auto, general and professional liability, auto physical damage, portable equipment, property, umbrella liability, directors and officers, and workers compensation coverage.
Limits for coverage range from $100,000 combined single limit to $1 million CSL for auto liability; $100,000/$300,000 to $1 million/$2 million general liability and professional liability; and $1 million/$1 million or $2 million/$2 million umbrella liability.
The program is accessible in all states and is underwritten by an A-rated Excellent insurer.
American Home Assurance Co. and other members of the American International Group, 70 Pine St., New York, NY 10270; (212) 770-7069; FAX 212-785-9234 (Richard L. Thomas, President, Public Entity Division). This insurer writes insurance for all the needs of public entity exposures. The coverages include: accident & health, auto liability, aviation, commercial general liability, construction wrap-ups, employment practices liability, environmental coverages, fidelity and surety, marine, medical professional, pension trust, professional & omissions for school leaders and public officials, property, umbrellas/excess and workers compensation.
Limits available are $2 million for primary liability and up to $25 million excess/umbrella. Police liability limits are $1 million primary; $5 million excess.
Facilities are available to all licensed agents and brokers in all states.
Apex Insurance Agency, Inc., 4880 Cox Rd., Glen Allen, VA 23060292; (804) 967-0198; 800-366-1213; FAX 804-967-0697 (Karl Snearer or Bret T. Van Leeuwen). This managing general agency writes public officials, law enforcement and school board liability on an exclusive basis for an A++ rated carrier. The agency insures over 4,500 cities, towns, counties and school districts.
The public officials policy covers actions or decisions claiming violation of civil rights, such as employee dismissal, discrimination and sexual harassment, compliance with the Americans with Disabilities Act and land use violations. The policy provides full prior acts for unknown incidents, defense costs outside of policy limits, three-year tail available, $50,000 coverage for non-monetary claims that are employment related, back wages coverage and aggregate deductibles.
The law enforcement policy is an occurrence form. It features coverage for intentional acts, violation of civil rights, includes assault and battery, defense costs outside policy limits, and $50,000 benefit for all covered police officers killed in the line of duty.
Professional liability limits for primary coverage are up to $1 million. Apex will provide up to a total limit of $25 million including primary and umbrella/excess liability.
The underwriter for these programs is General Star. Facilities are available to all licensed agents and brokers in all states.
Burns & Wilcox Ltd., P.O. Box 707, Southfield, MI 48037-0707; (810) 932-9000; 800-521-1918; FAX 810-932-9050 (David Price or Steve Allen). This managing general agency writes public officials liability, police professional, ambulance attendants and EMTs professional, firefighters professional and educational entity liability. Property insurance also is written for all of the above.
Limits available are: up to $5 million for public officials and educational entity liability; up to $1 million for police, ambulance attendants and EMTs, and firefighters professional liability and unrestricted limits for property coverage.
Scottsdale and Tudor are the carriers for public officials and educational entities; Scottsdale and Western World, for police professional; Western World and Legion Indemnity, for ambulance attendants and EMTs; and Scottsdale and Western World, for firefighters.
Availability of the programs varies from state to state. The firefighters program applies only in CO, MN, NE, ND, SD, WI and TX. Other programs, except for ambulance attendants, are available in all states except AR, MI, MA, NH and CA. The companies do not write in AK, HI and NY.
CNA Insurance, CNA Plaza, Chicago, IL 60685; (312) 822-5413; FAX 312-755-2048 (Bruce Weaver, Commercial Affiliated Marketing). This company writes a municipal insurance program for cities, towns, villages and counties. The coverage applies to fire districts and schools if they are under the control of cities or counties. Separate programs also are available for non-affiliated fire districts and their ambulance units and for law enforcement and schools.
General liability limits available for the program are $1 million/$2 million. Public officials liability, law enforcement liability are included. Employment practices liability and pollution coverage can be endorsed.
Program is available in all states except HI.
COREGIS, 181 W. Madison, Ste. 2400, Chicago, IL 60602; (312) 849-5125; FAX 312-849-5400 (Thomas R. Eisenhart). This firm provides public officials liability insurance to cities, towns, counties, townships; and public authorities, such as airports, housing, port, sports arenas and stadiums, transit; special districts including fire, park, road, utility and water; and boards throughout the country.
The policy furnishes up to $10 million in professional liability limits. Coverage includes employment-related practices; civil rights violations; full prior acts; insured vs. insured suits; violations of zoning power; and monetary claims arising from loss involving a governmental regulatory agency.
The coverage is accessible to all agents and brokers in all states through company offices in Chicago, New York City and Sacramento.
CoverX, 29621 Northwestern Hgwy., Southfield, MI 48034; 800-762-6837; FAX 248-358-2459 (Virginia Stirnweis). This program manager has been writing public officials liability since 1989. In addition to public officials of the governmental entity, the agency also writes coverage for special service districts including schools, airports, health care facilities or authorities, utilities, transit or housing authorities.
The policy also covers actions under the civil rights laws, regulatory agencies, ADA violations. Defense costs may be either covered outside policy limits or within policy limits.
The program is available in all states except CT and NH. The agency has an exclusive contract with Empire Indemnity (A+VIII).
David Ellis & Co., Inc., 3552 Old Gettysburg Rd., Ste. 203, Camp Hill, PA 17011; (717) 737-0200; FAX 717-737-0222 (Frank R. Wagner, CPCU, Marketing Mgr. and Bruce Coulson, Vice President, Underwriting). This agency was founded to provide risk management and insurance to small urban and rural transit providers and special-efforts transportation providers. Currently, it writes all aspects of insurance for community transit providers.
The basic policy protection includes: commercial auto bodily injury, property damage, personal injury protection, uninsured/underinsured motorists and medical payments; and collision and comprehensive coverages. The coverage also includes specialized life equipment and mobile communications equipment. Non-ownership auto coverage may be added. The policy also includes general liability/excess coverage. Coverage is accessible to agents and brokers in all states. It is underwritten by an A+XV rated carrier.
Limits available are $1 million combined single limit auto liability; and $1 million/$2 million general liability. Products liability and personal injury limits are $1 million. Fire damage coverage is limited to $50,000 any one fire, and medical expense limits go up to $5,000.
Recent changes have added a limited claims expense reimbursement coverage for expenses incurred by an insured responding to allegations of violations of the Americans with Disabilities Act. Limits are $50,000/$100,000. A second general liability endorsement, the extended assistance endorsement, covers the transporter when assisted door to door and door through door service is required. The third new endorsement adds sexual and/or physical abuse coverage.
The Ellis Agency also offers a comprehensive insurance program for owners and operators of licensed emergency medical services providing basic and advanced life support, neonatal emergency care and/or medically necessary transport. A purchasing group, EMSI, provides the mechanism for writing liability insurance. The program is underwritten by Scottsdale Insurance Co., National Casualty Co. or Scottsdale Indemnity Co., all rated A+XV.
This program offers limits of $1 million/$2 million for general and professional liability, and $1 million for auto liability. Excess or umbrella coverage is available. The policy features defense costs over and above the policy limits; no AIDS exclusion; sexual abuse/molestation coverage; and separate aggregates for general liability and professional liability. The facility serves agents and brokers in CT, DE, DC, FL, GA, ME, MD, NH, NY, NC, PA, RI, SC, VT, VA and WV.
Go Pro Underwriting Managers, 7401 Beaufont Springs Dr., Ste. 400, Richmond, VA 23225; 800-368-3583; FAX 800-972-5345; www.gopro.com (Lucia Malon). Go Pro is an underwriting manager for public entity insurance. The public entity policy includes general liability, property, commercial auto, workers compensation, public officials liability with an employment practices liability endorsement, law enforcement liability with a separate canine mortality program for police dogs, educational entity liability, medical professional liability, excess and umbrella coverage. There is a separate PEP policy for small public entities of under 25,000 population.
The agency also offers an emergency services program including First Firefighters, a comprehensive coverage for municipal and volunteer fire departments; 911 errors and omissions; and EMT liability. An additional program, Waste Insurance Network, is offered to private waste haulers.
Limits are: general liability, up to $1 million/$2 million; property, $25 million per location; commercial auto, up to $1 million CSL; public officials, law enforcement and educational entity, $10 million each loss and annual aggregate; medical professional, $1 million/$3 million; First Firefighters, general and professional liability, up to $1 million/$2 million; motor vehicles, $1 million; 911 errors and omissions, $10 million/$10 million. The Waste Insurance Network program has auto and general liability limits up to $2 million/$2 million, umbrella, up to $25 million.
The programs are available in all 50 states, with a few exceptions. The underwriter is Scottsdale Insurance Co. (A+XV).
The James A. Grundy Agency, Inc., P.O. Box 1209, Glenside, PA 19039; (215) 887-8100; 800-338-4005; FAX 215-887-5017 (Carol Hughes-Grundy). This agency writes an insurance program for water companies endorsed by the National Association of Water Companies (NAWC).
Limits available are: general liability, up to $1 million/$2 million; boiler and machinery, up to $5 million. Auto liability is optional. The coverage is available to agents and brokers in all states except SC. The underwriter is Reliance Group.
New England Excess Exchange Ltd., P.O. Box 736, Montpelier, VT 05601; (802) 229-5066; 800-548-4301; FAX 802-229-4935 (Mari Schaarschnidt). This managing general agency writes public entities excess liability, special events, property, law enforcement and public officials liability, student A & H, sports liability, school board and educators legal liability, EMT liability and firefighters and police A & H. Limits are $1 million/$2 million, with maximum excess to $50 million.
Municipalities, counties, townships, school districts, ambulance services, volunteer fire companies, housing authorities, community colleges, public universities, sewage treatment districts, levee maintenance districts, transit authorities, water districts and fire districts are considered prospects.
Facilities are available to agents and brokers in New England and in FL through an affiliated Florida branch in Lake Worth. Underwriters include: AIG, CNA, Coregis, Fireman's Fund, General Star, Gulf, Lloyd's, Northfield, National Casualty, Scottsdale, Tudor and United National.
PENCO, 26 Century Blvd., P.O. Box 305107, Nashville, TN 37230-5107; (615) 872-3687; 800-4-PENCO-1; FAX 615-872-3522; www.penco.com (Doug McLaughlin). This managing underwriter specializes in public entity business. Public entities of all types, including cities, towns, townships, boroughs, villages, counties, parishes, states, fire departments, water, electric and gas utilities, and special districts, such as schools, water, irrigation, sanitation, ambulance, highway, parks, recreational, port authorities, convention and tourism authorities and municipal improvement districts are all considered.
Coverages written are: general liability, public officials and law enforcement liability; employment practices liability, property, inland marine, crime, boiler and machinery and excess liability. Workers compensation is available in most states.
Limits are: general liability, up to $2 million/$3 million; professional, up to $2 million/$2 million; commercial auto, $2 million CSL; and excess liability up to $10 million.
Facilities are available to agents and brokers in all states. Hartford Insurance, Northland, Coregis and Lloyd's are underwriters.
Princeton Risk Managers, Inc., 201 Wall St., Princeton, NJ 08540-1567; (609) 924-9222; 800-PRM-0099; FAX 609-924-8155 (Jim Griffith or Audrey Tate). This managing general agency writes municipalities, counties, townships, school districts, ambulance services, housing authorities, community colleges and public universities, sewage treatment districts and transit authorities. Coverages available are: general and auto liability, excess/umbrellas, special events, law enforcement and public officials liability, school board/educators liability, EMT liability and property. Excess workers compensation is also available.
The agency services agents and brokers in NJ and PA. Underwriters include: Reliance, Coregis, Genesis, General Star, United National, Safety National Casualty, Employers Re and Interstate Group.
Professional Governmental Underwriters, Inc., P.O. Box 35471, Richmond, VA 23235; 804-272-6557; 800-586-6502; FAX 804-272-7852 (Martin Kanipe or Amy O'Neil). This managing underwriter writes police professional liability, public officials liability and nonprofit directors and officers for townships, cities, boroughs, special service districts and campus/university police.
Limits are: $5 million/$5 million with $10 million available on an excess basis, for police and public officials liability; and $5 million/$5 million directors and officers.
The police policy features: a claims-made form; defense costs in addition to policy limits; civil rights coverage; departmentally approved moonlighting coverage; punitive and exemplary damages; appointed and elected officials as insureds; mutual aid and contracts between political subdivisions coverage; and $50,000 line-of-duty death benefits.
Civil rights and employment discrimination coverage is included in the public officials coverage. The facilities are available to agents and brokers in all states. Royal Insurance Group and United National Insurance Group are underwriters.
St. Paul Cos., 385 Washington St., mail code 504C, St. Paul, MN 55102; (612) 310-3349; 800-356-4098, ext. 3349; FAX 612-310-8951; www.stpaul.com (Tracy Whiteley, Underwriting Director, Public Sector Services). This insurer writes a public entities program including the following coverages: general liability, auto liability and physical damage; umbrella/excess liability; special events, property, inland marine, law enforcement and public officials liability, medical liability, boiler and machinery, crime, public employee dishonesty and workers compensation.
Limits for general liability/professional liability are available from $1 million or less to $25 million. The facility is available in all states. Accounts are serviced by six regional public sector offices in St. Paul; Cleveland; New York City; Charlotte, NC; Kansas City and Dallas. The underwriting companies are: St. Paul Fire and Marine, St. Paul Mercury and St. Paul Guardian Insurance.
Surplus Insurance Brokers Agency, Inc., P.O. Box 749, South Bend, IN 46624; (219) 287-2368; 800-342-5706; FAX 800-578-7758 (Carol Dhoore). This managing general agent writes municipal services insurance through Go Pro in Richmond, VA in the state of IN only.
Titan Indemnity Co., P.O. Box 65100, San Antonio, TX 78265-5100; (210) 527-2700; 800-3437-4740; FAX 210-527-2911 (Mitch Hill, Vice President Marketing). This insurer writes a program for cities, townships, villages, counties, utility districts and special taxing districts. Coverages include: general liability, including incidental medical malpractice, athletic participation, employee benefit liability; auto liability, public officials liability, law enforcement liability, property, workers compensation and excess liability.
Employment-related practice coverage, civil rights violations, zoning violations are available under the public officials program. The police professional liability program includes civil rights violations, canine and equine exposures, authorized moonlighting, assault and battery, false arrest, detention/correction facilities and mutual assistance agreements.
Titan offers general liability limits of $2 million/$6 million. Excess liability is available to $10 million over a $2 million attachment point. A program has been introduced for fire districts.
Volunteer Fire Insurance Services (VFIS), a subsidiary of The Glatfelter Insurance Group, P.O. Box 2726, York, PA 17405; (717) 741-0911; 800-233-1957; FAX 717-741-3130 (Dorothy Kelley or Shelva Eller). VISI pioneered specialized coverages to meet the needs of emergency service organizations almost 30 years ago. Today, it serves more than 10,000 emergency service clients in 49 states and Canada.
Coverages written include: property, portable equipment, auto liability and physical damage, general liability, including professional liability, umbrellas, directors and officers liability, including violations of civil rights and employee benefits plan liability, accident and sickness coverage up to $250,000.
Facilities are available to all licensed agents and brokers on a national basis. *
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