02-06-90 CCM - Laserfiche WebLink

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First, the city is exposed to some kinds of liability to which the statutory limits either don't or might not apply. Some possible examples are - liability under the federal civil rights acts - certain types of liability that the city has assumed contractually, in an indemnification agreement for example - liability for actions in another state; e.g. by a city official attending a conference, or under a mutual aid agreement with a political subdivision across the border - liability for a zoning action under an "inverse condemnation" theory of law Second, the city may buy higher limits because the underlying coverage might not cover the full extent of the city's exposure within the statutory liability limits in all cases. LMCIT applies a $600,000 aggregate limit to the "products liability", the "limited pollution", and the optional "inverse condemnation" coverages. This is an additional limit, besides the $600,000 per occurrence limit that applies to all liability coverage. The annual limit is the maximum amount the policy will pay for this kind of liability, regardless of the number of occurrences. Thus, if part of the annual limit is used up in one occurrence, there may not be adequate coverage limits available if there is a second loss of that type. Excess coverage can help protect against this risk. (Annual aggregate limits are very common in conventional commercial liability policies. Often the aggregate limit applies to all liability, rather than being restricted to only certain coverages as LMCIT's is. A similar problem can occur in policies where defense costs are subject to the policy limit; with that type of policy and a $600,000 per occurrence limit, if you spend $50,000 on defense you wouldn't have enough limits to cover the city's full exposure under the statute. LMCIT does not apply a limit to defense costs.) Third, the city may feel that the statutory limits aren't high enough to provide adequate compensation for very serious injuries, or for multiple parties. That is, the city might in effect say "We want to have at least a million dollars (or three million or five million, etc.) of coverage available, so that if we injure someone he won't go uncompensated if his injuries really do exceed the statutory limits." Finally, the city might be concerned whether the statutory liability limits will stand up in court. The statutory liability limits have been upheld in two recent Minnesota Supreme Court cases, so this is now less of a concern. However, it is always difficult to predict the future course of court decisions.