Lose Those Liability Gaps

Ross Williamson

Like most of you, the attorneys at the Local Government Law Group started the New Year by making New Year’s resolutions. But, as local government junkies, some of our resolutions can be a little “different”. This year, we skipped the weight loss resolution. Instead, we are resolving to help our clients lose those nasty tort liability gaps created by using outdated contracts.

By now, we all know that caps on tort liability damages for public entities under the Oregon Tort Claims Act (“OTCA”) increase from year to year effective July 1. But many may not know exactly what to do about these annual increases.

For most purposes, the good folks at City County Insurance Services (“CIS”) and the Special Districts Association of Oregon (“SDAO”) have public entities covered for these increases in the OTCA damage caps. CIS and SDAO are well aware of the OTCA damage caps and provide coverage accordingly. However, that does not mean that your government is in the clear.

Does your government use form contracts or recycle previous contracts? One area where form contracts can quickly become obsolete is in listing insurance requirements for contractors. If you are using a contract with a static liability insurance requirement, and one or more July has come and gone, it is likely that your contract is creating gaps in liability protection.

For example: Say you have been using the same contract for several years that requires a particular service vendor to obtain liability insurance in the amount of $500,000 to cover personal injury claims against your public entity. Well, that may have been good in 2010, but today’s OTCA personal injury damage cap is up to $566,000 for a single claimant. These numbers nicely illustrate the possible $66,000 liability gap that using an old contract creates.

In addition, the State of Oregon’s OTCA damage caps are much higher than those of local public entities. The State’s current personal injury damage cap for a single claimant is $1.7 million. But that doesn’t mean anything to us local government entities, right? Wrong. If you contract with the State, and especially if you provide services to or on behalf of the State, you need to be aware of the State’s OTCA liability limits. In certain situations, by doing work for the State, you may be taking on the State’s higher liability cap. Make sure to contact your insurance company, insurance broker, or attorney when you review a contract that has you working closely with the State of Oregon. If you take on the State’s liability limits, you certainly only want to do it with full knowledge.

We hope you will join us in resolving to get rid of those nasty tort liability gaps. And remember, come July 1, those OTCA damage caps will go up again.