Agenda Packets - 1984/10/22 - Laserfiche WebLink

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Legal Exposure One concern which surfaced in developing the CHIP relatrrrl to whether or not a city would incur any legal exposure relevant to involvement in the Program. Since the city's principal and virtually only function in the CHIP is the home safety and security analysis which the city offers to all citizens, legal exposure, if any, would most likely be related to that activity. Negligent inspection, therefore, appears to he the principal perceived risk. Recognizing this general issue independently of insurance matters, many states have enacted umbrella tort immunity statutes which would apply to CHIP as long as the city did not contract with anyone to perform the analysis service. The CHIP does not contractually obligate any one to request or perform the service, or purchase insurance once performed. Because not all stales provide for tort immunities, and because liberal courts appear to increasingly regard cities as deep pockets, CHIP was designed to provide as many mitigating factors as possible on behalf of the city and relating to negligent inspections: 1) The insurance carrier has waived any right it may have against the city for negligent acts by city staff arising from the home safety analysis. 2) Restitution for claims for covered losses from insured residents is provided through the insu- rance process, generally whether or not the resident believes there is a cause for action against the city. 3) Home safety analyses are services normally covered by the city's general liability insurance. 4) For purposes of the home safety analysis, the city represents only to "educate" the homeowner and his family in recognizing and correcting fire. thelt and injury hazards. A technical Inspec- tion to code provisions is neither represented nor intended This limited educational representa- tion should be made clear to citizens contemplating a request for the analysis service and to those receiving an analysis, at the time of the home visit. 5) Additional liability insurance is available to cil;cs at nominal cost, generally from their present insurance carriers. Other than the negligent inspection issue, the only significant point raised and reviewed in the course of developing the CHIP relates to anti-trust. This issue h:,s received considerable national attention due to the "Boulder Decision:" Prior to that decision, several independent legal opinions were rendered for CHIP. These have been reviewed in the light of "Boulder' wherein no need to modify the opinions was seen. The "worst case," analyzed by the Los Angeles law firm of Gibson, Dunn & Crutcher, specializing in anti-trust matters, conjectured a long-term (5 years) exclusive contractual relationship between the city and the insu- rance carrier. G, D & C's opinion saw no anti-trust exposure for the "exclusive contract" case, and since none of the CHIP relationships is either long-term or exclusive, little or no anti-trust exposure for CHIP is apparent. While the discussion above has briefly focused on a few legal issues, extensive legal research was done during the development of the CHIP. These legal opinion are available for review by city attorneys on written request on city letterhead, but remain the property of the AVCO Financial Insurance Group. In addition, the many city attorneys and independent legal advisors who helped develop the CHIP have indicated a willing- ness to assist cities in interpreting the opinions and other legal matters associated with the program. Section 10 — Income Formula Certain aspects of thefinancial issuesand the premium return formula arediscussed belowtoprovidea general overview of the premium savings concept. r 12