02-14-1990 Council Agenda - Laserfiche WebLink

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Continued from page 16 Note that an annual aggregate limit in a policy might apply to the entire policy, or just to certain parts of the coverage. LMCIT's liability coverage, for example, has an annual limit on products liability claims, on the limited pollution coverage, and on the optional "inverse condemnation" coverage. Another way in which primary cov- erage can turn out to be inadequate is if the policy includes defense costs in the limit. Suppose a policy carries a $600,000 limit and includes defense costs in the limit. If in attorneys fees to defend a case were $50,000, and the case resulted in a $600,000 judgment against the city, the city would have to come up with $50,000 out of its own funds. The LMCIT liability coverage does not include defense costs in the limit. However, some of the new liabil- ity policies recently drafted by ISO do contain this kind of limit. Adequate compensation to injured parties A fourth argument for buying higher limits of liability coverage is that the city might want to have enough cover- age available to help assure that per- sons injured by the city's negligence will be adequately compensated. As an example, imagine a catastrophe involv- ing many people —say a city vehicle runs into a school bus full of children, or a city -owned bleacher full of people collapses. The $600,000 might not go far toward covering all of the injuries to 50 or a 100 or 200 people. Broadened coverage In the past, another common reason for buying an "umbrella" policy was that such policies often provided broader coverage than the underlying policy, in addition to providing higher limits. That is, the umbrella policy would cover some kinds of liability which the primary policy would exclude. It is now less common to find this broadened coverage in umbrella policies; in fact, an umbrella may well exclude things which the primary policy covers. In the case of LMCIT's liability coverage for cities, the primary cover- age is extremely broad. The excess coverage which LMCIT offers gener- ally matches the primary coverage. 18 Why not buy higher limits? One reason for not buying higher limits of liability coverage is cost. As they do in many other areas, city council members need to consider whether the added protection which higher limits provide is worth the added cost. A second possible argument against purchasing higher limits is that it might encourage a claimant to make a bigger claim. That is, a claimant might be more inclined to make a big demand if he or she knows that the cost will be borne by an insurance company or by a statewide pool such as LMCIT. On the other hand, if they know that the money will come directly out of the local taxpayers' pockets, some claim- ants may moderate their demands somewhat. In short, there is no single clear answer as to how much liability cover- age is enough. Rather, this is one more area in which the council must exercise its judgment and discretion. Regardless of whether the council decides to pur- chase higher limits or not, cities should make sure that the council minutes reflect that the council members care- fully considered the decision and their reasons for reaching their decision. Such a record will help make it clear that this was a discretionary decision. This in turn could be useful if someone were later to argue that the council- members had been negligent in not purchasing adequate limits of liability coverage. IN Minnesota municipal bond sales December 1988 Date Maturity Municipality Amount 11 -30 23 ISD #738, $3,575,000 Holdingford 12 -1 17 Blaine 1,755,000 12 -1 12 Blaine 2,400,000 12 -5 22 ISD #15, St. 13,750,000 Francis 12 -5 5 Shoreview 605,000 12 -5 5 Shoreview 565,000 12 -5 11 Shoreview 12 -6 8 County of Stearns 12 -7 13 ISD #701, Hibbing 12 -8 16 Benson 320,000 250,000 5,500,000 560,000 12-8 21 Benson 345,000 12 -12 16 ISD #659, 2,035,000 Northfield 12-12 17 New Hope 1,600,000 12 -12 20 Bloomington 2,690,000 12 -12 12 -13 12-13 12-13 12-13 12 -13 12 -13 12 -14 12 -14 18 Bloomington I1 Champlin 12 Albertville 17 ISD ++423, Hutchinson 16 Faribault 16 Faribault 16 Eden Prairie 22 ISD #742, St. Cloud 17 Braham Page 61 2,590,000 1,660,000 505,000 2,750,000 595,000 460,000 9,800,000 25,200,000 160,000 Type Rating NIR G.O. Refunding BR 7.62 G.O. Tax Increment G.O. Improvement G.O. School Building A A Aaa (FGIC) Al Al 6.92 6.68 7.65 G.O. Park 6.53 G.O. Equipment 6.53 Cert. G.O. Improvement A 1 6.85 G.O. Solid Waste Baa 1 6.88 G.O. Bonds Baa 7.47 G.O. Water & Sewer Baa 7.34 Revenue G.O. Tax Increment Baa 7.52 G.O. School Building A 7.00 G.O. Improvement A 1 7.07 G.O. Perm.Impr. Aa 6.77 Rev. Fund G.O. Storm Sewer Aa G.O. Refunding Baa 1 7.02 G.O. Adv. Rfdg. NR 7.23 G.O. School Building A 7.18 G.O. Bonds A 1 G.O. Bonds A 1 G.O. Improvement Aaa G.O. School Building A 7.08 7.07 7.00 7.39 G.O. Water & Sewer NR 7.46 Revenue Minnesota Cities