Public entities are in the unique position of continually being under the microscope, making headline news as a result of heightened law enforcement scrutiny and accountability combined with a #metoo society, aggressive attorney advertising and public desensitization to large verdicts that have further fueled the litigation landscape.

In addition, inflation is now impacting the cost of insurance. These factors, along with others, make it hard for public entities to find the right combination of property and casualty coverages.

Bad Press and Nuclear Verdicts

"Turn on the evening news or scroll through stories and posts on social media, and inevitably you will find incidents involving public entities," says Bob Lombard, area president for Risk Placement Services (RPS).

"This news creates challenges for public entities, as they are held to a higher level of scrutiny. They are here to serve the public and as a result are constantly in the eye of the storm and the potential target of litigation."

In addition, Lombard says, with the courts reopened and juries reconvened post-pandemic, all indications point toward a continuation of nuclear verdicts.

"The amount of these awards will depend on state jurisdiction and the alleged negligent act."

Insurers Evaluating Books of Business and Coverage Lines

As a result, insurers are continuing to evaluate their books of business and making corrections, particularly for difficult lines of coverage.

"Some are eliminating coverage for law enforcement liability," explains Lombard, "while others are reducing the limits they are willing to provide for sexual abuse/molestation coverage. Also, while three or four years ago we were able to get $10 million in excess coverage from a single market, today the standard is $5 million. We look to other markets to provide the additional coverage and limits necessary."

Terrorism is also an ongoing risk for public entities, particularly with the turmoil taking place globally today.

"Public entities have a duty to defend the public, and the impact of a terrorist act is a top-of-mind concern."

Inflation Is a Factor

High inflation is also affecting public entities' budgets and the cost of insurance. The higher cost of construction labor and building materials, for example, has a direct impact on an entity's building values and is putting pressure on commercial property insurance.

"Underwriters are asking more questions and looking for property values to be updated in an entity's policy schedule. The same applies to automobiles. Replacement vehicles are more expensive due to supply issues and rising manufacturer costs. Bringing values up to date increases insurance premiums."

Get Ahead of Renewals and Be Transparent

To deal with a challenging market, Lombard recommends that insurance agents get ahead of renewals and remain transparent with clients.

"Speak with your clients about the factors influencing their insurance program. Get in front of the situation.

"You have solutions with RPS," Lombard says. "We are committed to working with you to look at alternative markets and structures, including having an entity take on additional risk in the form of higher retention levels. We can also help insureds manage risk better, particularly smaller entities that don't have a full-time staff responsible for risk management."

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