States, Municipalities Act To Stem Insurance Woes
Lawmakers and activists at the state and national level are moving to counter the serious liability-insurance problems facing school districts and other public entities.
The problems surfaced in recent months as school districts and other agencies across the nation were informed by insurance firms of policy cancellations or steep rate increases. Insurance-industry officials cited as a principal reason for the crunch the dramatic increases in the size of jury awards for damages in lawsuits brought against public entities.
Attempts to address the problem, in addition to proposed caps on the amounts of jury awards, are focusing on the restructuring of court systems and the establishment of self-insurance pools for municipalities and school systems.
In at least one state, reformers are working to bring the liability-insurance issue before voters in a referendum. And other local and state ballot initiatives on the issue appear likely in the coming year, according to Patrick B. McGuigan, editor of Initiative and Referendum Report, a publication of the Free Congress Research and Education Foundation.
"This is something that is really popping up now in middle-sized and smaller communities that are trying to keep from going broke," Mr. McGuigan said. State referenda, he noted, usually follow local efforts.
In the meantime, the Commerce, Transportation, and Tourism Committee of the U.S. House of Representatives plans to hold a second hearing on the issue of liability insurance for public entities next month, after which it may draft legislation.
And the Child Care Action Campaign, a public-awareness group, is completing a group insurance plan that it hopes to make available to day-care providers who have been the victims of rate hikes or cancella-tions. (See Education Week, Sept. 11, 1985.)
In New York, where many school districts have experienced "astronomical" increases in rates for catastrophe insurance as well as decreases in coverage, 56 Republican lawmakers and a coalition of school and municipal groups are both pushing the legislature to add the insurance issue to its agenda when it reconvenes next month, according to Robert J. Rader, legislative representative for the New York State School Boards Association.
The two groups are proposing legislation that would:
Require that all lawsuits against municipalities and districts be heard in the State Court of Claims to reduce the amount of damages the local entities must pay when they lose suits.
Reform the state's tort law so that the portion of a jury award assigned to any municipality or school district would be limited to the actual percentage of damages. (Under current law, a judge can require that a defendant found responsible for only 2 percent of the damages pay up to 100 percent of the award.)
Direct the state insurance department, which sets insurance rates on a year-to-year basis, to begin multi-year rate-making for municipalities and districts.
Direct the state superintendent of insurance to establish a regulatory structure that would encourage cooperative insurance agreements and joint insurance funds for municipalities and school districts.
Fair Responsibility Act
In California, supporters of an initiative called the "Fair Responsibility Act of 1986" are working to get the signatures of 393,835 registered voters in order to place the measure on the June 1986 ballot.
Under current California law, juries may make economic awards--usually for medical costs, property damage, and loss of earnings--and non-economic awards, which cover emotional suffering and mental dis-tress. In addition, under the state's joint-responsibility doctrine, any one of several parties being sued can end up paying all or most of the damages if the other defendants cannot pay or are inadequately insured.
The proposed initiative would not change joint responsibility for economic loss. But in the non-economic portion of the claim, a defendant would not be required to pay more or less than a proportional share of the responsibility as determined by the court, according to Brad L. Moore, a spokesman for Taxpayers for Fair Responsibility, a coalition of business and government organizations that is running the campaign.
Although similar measures have failed four times in the legislature due to what Mr. Moore termed the "tremendous lobbying power" of the state's trial lawyers, he predicted widespread public support for the initiative, especially from school boards.
The state attorney general's summary of the initiative reports that the proposal could save state and local governments "several millions of dollars annually," an estimate Mr. Moore said is "extremely conservative."
In Maryland, the state's 141-member Municipal League is working on proposed legislation that would limit liability awards against cities and towns to $100,000 and limit lawyers' fees to 20 percent of a settlement and 25 percent of a court award, according to Jon C. Burrell, executive director of the league.
School boards in Maryland, which are not insured through municipalities, are covered under a similar tort-liability cap that went into effect several years ago, according to Mr. Burrell. The league's efforts would not affect districts' protection, he said.
Both the municipalities league and the Maryland Association of Boards of Education are also considering establishing self-insurance programs.