06-28-2012 Council Agenda - Laserfiche WebLink

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LMC League 4 Minnesota Cities Cities promoting excellence League of Minnesota Cities Insurance Trust 145 University Avenue West, St. Paul, MN 55103 -2044 (651) 281 -1200 • (800) 925 -1122 Fax: (651) 281 -1298 • TDD: (651) 281 -1290 www.lmnc.org The 2006 joint powers liability legislation What does it mean for cities? The Reimer v. City of Crookston decision in 2005 created a serious liability issue for cities involved in joint powers activities. Briefly, the court ruled that a city involved in a "joint venture" with another political subdivision could be vicariously liable for the other political subdivision's actions. The Court also said that a claimant could "stack" the liability limits of each of the political subdivisions who were involved in the "joint venture ". Because that effectively multiplied the tort liability exposure in many joint powers situation, it created a substantial disincentive for intergovernmental cooperation. The League in cooperation with other local government organizations made this a legislative priority in 2006 and that effort was ultimately successful with the passage of 2006 Minnesota Session Laws, Chapter 232. The 2006 legislation. Chapter 232 addresses both issues raised by the Reimer decision by adding two provisions to the joint powers act, M.S. 471.59, effective May 25, 2006: • The law now specifies that a governmental unit is not liable for the acts of any other governmental unit in ajoint venture or joint enterprise, unless the governmental unit has agreed in writing to be responsible for another unit's acts or omissions. In other words, vicarious liability is in eliminated in joint powers situations. • The law now specifies that the participating governmental units and any joint board the units have formed are considered to be a single governmental entity for purposes of applying the statutory tort liability limits. In other words, a claimant's maximum potential recovery is the same, regardless of whether his /her injury was caused by a single governmental unit or by an intergovernmental arrangement. Note though that this would not protect a city from liability from its own independent acts or omissions not directly related to the joint activity. Besides addressing the limit- stacking problem for joint powers activities, Chapter 232 also provides for future increases in the statutory tort limits. The current limits are $300,000 per claimant, and $1,000,000 per occurrence. Those limits will increase to $400,000 per claimant and $1.2 million per occurrence effective Jan. 1, 2008; and to $500,000 per claimant and $1.5 million per occurrence effective July 1, 2009. These increases will have some effect on liability costs and rates, though the effect should be relatively modest. On the other hand, and arguably more importantly, these adjustments will also be important in assuring that the tort limits will continue to pass constitutional muster. In cases that have challenged the statutory tort limits, the Minnesota Court has specifically said that in order for the limits to continue to be upheld, it's -13- AN EQUAL OPPORTUNITY /AFFIRMATIVE ACTION EMPLOYER