Laserfiche WebLink
LMCIT Coverage <br />There is a real possibility that cities could be sued as a result of the Year <br />2000 problem. If Y2k problems cause a lift station to malfunction and the <br />sewer to back up into a resident's house, or a traffic accident occurs because <br />a Y2k problem with the traffic lights, the people who were damaged might <br />very well make a claim against the city for their damages. Regardless of <br />whether or not the city is in fact liable for those damages, it is important for <br />the city to have liability coverage, since defense costs could be substantial. <br />The League of Minnesota Cities Insurance Trust (LMCIT), a self - insurance <br />pool for Minnesota cities, is also looking closely at this potential risk. Because <br />the risk is great and the amount of damages is so unpredictable, LMCIT will <br />probably not be able to automatically provide full coverage to Minnesota cities <br />for all of their Y2k-related claims. LMCIT tentatively plans to provide some level <br />of Y2k coverage, depending upon its financial resources and the support of its <br />reinsurance companies. <br />Underwriting Criteria <br />Under the proposal currently being considered by LMCIT, member cities <br />would automatically receive a very limited amount of coverage forYear 2000 <br />risks and would have the opportunity to purchase expanded coverage, if the city <br />can meet underwriting criceria.The criteria are still being developed, but would <br />essentially look at cwo points: <br />1. Whether the city has taken reasonable steps and followed reasonable <br />procedures to identify and correct as many Y2k problems as possible. <br />2. Whether the city has contingency plans in case ofY2k- related malfunctions <br />or failures. <br />Basic Coverage <br />If the city does not meet underwriting criteria, it would have very restricted <br />coverage. There would be a small amount of liability coverage (probably <br />around $25,000 per incident) which would cover all claims for the year and <br />would apply to both damages and defense costs. Coverage for damages to the <br />city's property would also be limited to situations where the equipment failure <br />league of Minnesota Cities <br />PAGE 228 <br />8 <br />If the oily is not <br />a member of <br />the League of <br />Minnesota Cities <br />Insurance Trust <br />(!MC177, it should <br />be sure to contact <br />its insurance com- <br />pany to determine <br />how this risk will <br />be covered. <br />Many companies <br />are specifically <br />excluding Y2k - <br />related claims from <br />coverage while <br />others may provide <br />coverage, but for an <br />additional premium. <br />A Year 2000 Action Guide <br />