2005-10-12 CC Packet - Laserfiche WebLink

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Since the city's vicarious liability is subject to the statutory limit just as the city's direct liability is, the city's existing coverage limit should be sufficient to cover the city's exposure? One circumstance in which the court's ruling could create a coverage limits problem with mutual aid and contract for service agreements is if the agreement contains defense and indemnification provisions. LMCIT generally recommends that mutual aid and contract for service agreements include provisions for the party in charge to defend and indemnify the other party. The goal is to eliminate conflicts among defendants and make it possible to present a single unified defense. But under the court's ruling, that could result in the city having to pay not only for its own liability up to the statutory limit, but also to indemnify the other city for that city's vicarious liability. That could add up to more than the city's coverage limit. LMCIT's model mutual aid agreement incorporates "limited indemnification" language that's designed to avoid creating this problem. The model agreement is available on the web at http://www .lmnc.org/pdfs/mutualaidmodel. pdf. Agreements creating a joint powers entity As noted earlier, any "joint powers entity" as defined in the LMCIT liability coverage is pretty clearly going to be considered to be a "joint venture". Under the Reimer ruling, in a liability claim arising from the joint powers entity's activities the claimant or claimants potentially can now apparently recover up to the statutory liability limit from each of the participating political subdivisions. The result is that the effective limits on liability arising from a joint powers entity's activities are now equal to $300,000 times the number of members for each claimant; and $1,000,000 times the number of members for each occurrence. Essentially, this stacking of vicarious liability represents another way in which the liability exposure for ajoint powers entity could turn out to be greater than the basic $1,000,000 limit of coverage which LMCIT provides. Of course, there are and always have been other ways in which a city or a joint powers entity could end up with liability exceeding its coverage limit - federal civil rights claims, contractually assumed liability, etc, Suggested strategies for cities For mutual aid and contract for service joint powers agreements . If the agreement includes defense and indemnification provisions, make sure that those provisions limit the city's duty to indemnify to an amount no greater than its coverage limit. Suggested language can be found in the LMCIT model mutual aid agreement at http://www .lmnc.org/pdfs/mutualaidmodel. pdf. 2 Provided, of course, that the claim is of a type that's subject to the statutory limit in the first place; e.g., it's not a civil rights claim, etc. 3