We are frequently asked, “How high should our liability limits be?” It’s a common question both for those of us in the Pool, and in the wider world of insurance. The answer is complicated, but we can sum it up easily by saying this: Your limit should be high enough to cover your assets should someone want to sue you for everything you’re worth.
For special districts, there is the double-edged sword of sovereign immunity. The Colorado Governmental Immunity Act (CGIA) places a statutory cap on the liability faced by a public entity. These caps place tort limits at $350,000 per claimant and $990,000 per occurrence. This falls well within the Pool’s basic liability limit of $1,000,000. This might falsely lull some into thinking that this was all the coverage your district needs.
Think Again
Unfortunately, that isn’t always the case. Payouts resulting from claims made under state statute make up only a small percentage of the Pool’s losses. Claims related to discrimination, sexual harassment, and other events covered under Federal law have the potential to be much more costly.
The CGIA provides no protection to public entities for federal law and those claims have the potential to explode well into the millions. These cases can be long, dramatic, embarrassing, and destructive.
In addition to federal statute, there are also other state torts to include auto liability for which there is no protection under CGIA. For example, anyone traveling by car within the course and scope of their duties has no limit on auto liability when traveling outside of Colorado, so driving to an out-of-state conference or training event could present an enormous exposure.
State tort caps like CGIA are currently still in force, but their power has been eroded over time by court rulings and legislative changes. In 2009, an Oregon jury awarded a public entity $12 million at trial. The presiding judge allowed the judgment to stand, overriding the state tort cap. Just a few years earlier, in that same venue, a judge ruled that the state’s tort cap, which at the time was $200,000, was too low and violated the state’s constitution which guaranteed that every person “shall have remedy by due course of law for injury done him in his person, property, or reputation.”
The Best Option for Your District
Below is a table illustrating which Excess options are most popular among Pool members based on their total operating expenses. We highlighted the $1 and $2 million options, since they appear to be the most popular, though depending on entity size and type, many districts opt for much higher levels.
Fortunately for members, increasing the total limit of liability is often very affordable. If you would like to consider higher limits, partner with your broker or contact us for more information about what options are best for your district based on its particular needs.
