Who says predictability is a bad thing?

One of the more entertaining claims made in recent years against a member of the MML Liability & Property Pool involved an intoxicated man who called the police to arrest his wife following a domestic dispute, only to end up getting arrested himself. Although he was only going to be detained for a relatively short period, our hero decided that he had to “escape.” So, despite the fact that he was in a room full of law enforcement personnel and would soon enough be sent home, he bolted through a window. The only problem was that the window was closed – and yes, it was on the second floor of the building. He, of course, suffered some broken bones and had to deal with the legal consequences of his misdeeds. Nonetheless, he still managed to find a lawyer who was willing to file a lawsuit against the officers alleging that they should have prevented him from hurting himself!

Fortunately, the legal doctrine of governmental immunity protected the city and its employees from having to face the risk of trial and the possibility of a substantial jury verdict. Justice ultimately prevailed and the case was dismissed, but not before substantial legal defense fees were incurred.

Of course, it isn’t always that simple for municipal officials to avoid liability for incidents arising out of the performance of their duties. There are a number of exceptions or partial exceptions to the immunity statutes, and the courts interpret those exceptions in a variety of ways.

No doubt, there are also times when fairness would seem to demand that monetary compensation be paid to innocent victims of governmental mistakes, yet those same officials may nonetheless be protected from legal liability.

Why is governmental immunity necessary?

First and foremost, to protect the health, safety and welfare of the public. The existence of governmental immunity is virtually universal. Governments are obligated to provide vital services and have no option to discontinue doing so. The ability to provide these crucial services is a function of limited tax revenues available in each community. Governmental immunity protects public funds, ensures the availability of resources to protect residents, reduces nuisance claims, encourages individuals to take public service jobs by reducing the fear of lawsuits and helps governments provide services in a consistent manner by reducing the likelihood that one, or a few, lawsuits will wreak budgetary havoc.

What do we ask for?

When the League advocates – with the Legislature through its State and Federal Affairs Division or through the courts utilizing the Legal Defense Fund – what are the most important considerations from a risk management standpoint?

Despite what is occasionally represented by plaintiffs groups or the media, insurers aren’t necessarily interested in eliminating all liability for all things. The current exceptions to immunity which allow lawsuits under a number of circumstances were enacted by the legislature to meet the government’s responsibility to provide redress in cases where the burden of a public official’s negligence falls too heavily on one, or a few, individuals. We also realize that the legal environment “pendulum” swings. Our goal is to influence that process by ensuring that any changes that do occur are done slowly, with significant forethought.

Clarity and predictability

More than anything, insurers need legal clarity and predictability. The better an insurer can estimate what losses will be incurred years after you have paid your premium, the better it is able to accurately asses a “correct” price – that is, enough to meet all of its financial obligations on your behalf, without overpricing.

Insurance entities need to know that the legislature will not tinker with existing statutes without a very clear purpose and without very careful and deliberate consideration from all interested stakeholders. They need the courts to then interpret those laws by simply applying the plain meaning of the words in the statute.

Without that predictability, insurers are forced to build a larger margin of safety into their premiums or risk becoming insolvent, and therefore charge higher premiums. That means that the financial implications of even what appear to be modest changes in the legal environment can actually have a significant adverse impact – and of course, that is the last thing already stressed local budgets need.