How much insurance do you need to know?

How much do elected officials need to know about insurance and risk management to make informed decisions on behalf of their communities? The adage "A little knowledge is a dangerous thing" need not apply to municipal insurance if elected officials remember a few simple guidelines.

There certainly seems to be a trend towards larger and larger jury awards. We hear so often that our society has become more litigious that it almost has become a cliché. Municipalities are targeted for litigation often because of the so-called "deep pockets" of your tax base.

But let me add some perspective. There are more than 500 cities and villages that are members of the Michigan Municipal League. Many of them, especially our villages, go years without an insurance claim. If you add to this the number of members that rarely encounter an insurance claim beyond, say, a minor traffic collision, the number of members who have had "big hits" is truly small indeed.

Most claims for bodily injury, property damage or "wrongful acts" that are made against a municipality never result in a lawsuit. In 1997, our Liability and Property Pool received 3,013 claims filed against our members. Only 482, or 16 percent, developed into lawsuits.

Two points should be clear. First, elected officials should be generally aware of municipal liability issues. Secondly, elected officials should avoid "litigation paralysis" – the belief that making no decision and avoiding possible lawsuits is preferable to acting in the best interest of your community.

Generally, councils and their individual members have immunity from liability for their decisions. Local government would truly come to a standstill if elected officials could successfully be sued by the "losers" of every motion on which they vote.

I am certain that you did not make a commitment to local government with the intention of becoming a municipal liability expert. However, you will serve yourself well by keeping the following three recommendations in mind.

First, utilize your municipal attorney’s expertise. Your attorney should be present at all regular meetings, and should be given time to review the agenda in advance. Your own good judgment will often tell you which items require diligent deliberation and possible legal advice.

Question your attorney on the legal ramifications of your decisions. If an agenda item requires further study, it is preferable to table the motion than to act with incomplete information.

Second, your city or village should have an acceptable insurance program. You should be generally aware of how coverage responds (or doesn’t respond) for issues you commonly consider.

For example, if you are a growing community, you probably have zoning variance requests through the year. Make sure you are aware of how your insurance responds to zoning and land use litigation before you make a decision on a zoning issue.

Third, use the services of your Michigan Municipal League. Through a variety of media, we offer numerous opportunities to educate and familiarize municipal officials and staff.

• Educational workshops are offered that deal with various liability issues.
• A phone call to the League’s inquiry service can direct you to sources of information that can provide assistance.
• The League’s Risk Management Services Division has a staff of professionals who can assist you with most insurance issues.
• A wealth of insurance information is available online at the web site of the Michigan Municipal Liability and Property Pool, the League-sponsored and administered insurance program.
• The Risk Management Services Division publishes Risk Management News six times a year. Each issue is devoted to municipal risk management and insurance issues. It is available through the mail or on-line.
• The League’s annual convention has a variety of concurrent sessions, exhibit booths and networking opportunities at which information can be obtained.