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4vA of NEW Report Number 12-257 BRIGHTON Agenda Section VI-3 the city that works for you Council Meeting Date November 13,2012 REQUEST FOR COUNCIL CONSIDERATION ITEM DESCRIPTION: RESOLUTION MAKING AN ELECTION NOT TO WAIVE THE STATUTORY TORT LIMITS FOR LIABILITY INSURANCE PURPOSES DEPARTMENT HEAD'S APPROVAL: CITY MANAGER'S APPROVAL: No comments to supplement this repor Comments attached Recommendation: To adopt the RESOL ON MAKING AN ELECTION NOT TO WAIVE THE STATUTORY TORT LIMIT FOR LIABILITY INSURANCE PURPOSES Legislative History: The City procures its liability insurance from the League of Minnesota Cities Insurance Trust (LMCIT). The LMCIT requires an annual resolution to be adopted by the City Council making an election to waive or not waive the statutory liability limit. Our insurance agent has told me that very few cities waive the tort limit. The City Council has made the election NOT to waive each year for at least the past eleven years. Financial Impact: There is no financial impact for the non-waiver of the tort liability limit. A potential significant financial impact exists if the City were to choose the waiver option. The City and the LMCIT no longer could use the statutory limit of$500,000 per claimant and $1,500,000 per occurrence as a defense. The City's exposure would be much greater. Since the waiver increases the City's exposure, the liability insurance premium would be about 3.5% higher. Excess liability insurance coverage should be purchased if a waiver was made. The quote for excess liability insurance without a waiver for 2011 was about $30,000. Excess liability insurance purchased with a waiver would result in an additional increase to the liability premium as previously noted. Explanation: Minnesota Statutes 466.04 has set the maximum liability limits for cities at $500,000 per claimant and$1,500,000 per occurrence. The City's current insurance policies provide coverage up to that tort liability limits as provided by Minnesota Statutes. The LMCIT allows the City the option to waive those limits if it chooses to do so. The LMCIT is now requiring cities to make their election with regards to waiving or not waiving its tort liability as established by Minnesota Statutes 466.04 by resolution. On occasion, some cities may be required by contract to carry higher coverage limits. The City of New Brighton has no such contracts. Sometimes cities choose to carry higher coverage because of concern that the courts might overturn the statutory liability limits. However, the limits have been tested and upheld several times in Minnesota. While it is always possible that a future court might decide to throw out the statutory limits, this is not much of a concern.