The public sector provides a broad range of services, and insuring their risks can be challenging. Within a single entity, such as a state, city or county, there are prisons, airports, police, etc., and entities that provide zoning ordinances, maintain bridges, run golf courses, and oversee water and sewer utilities.
“Public entities have a broad range of risks that need to be analyzed,” says William F. Becker, executive vice president and national practice leader – public sector, Aon Risk Solutions. “Many of these risks are unique, and trying to find carriers who understand that and will take on those risks can be challenging.”
Smart Business spoke with Becker, Steven P. Kahn, managing director of Aon Global Risk Consulting, and Mark Blassie, who works in business development at Aon Risk Solutions, about insuring the public sector.
What is included in the public sector?
The traditional definition is any governmental entity, encompassing cities, states, counties, towns and special districts, along with authorities, commissions, school systems, utilities, transits and airports. Aon’s practice group also supports nonprofits, political organizations, Indian Country and higher education institutions, both public and private.
How are insurance needs different for public sector entities?
Public entities see some of the same issues as private entities, but there are certain risks in the public sector that are not seen in private organizations because they provide services that other organizations do not, such as prisons, fire and police, zoning and bridge maintenance. Pursuant to sovereign immunity laws, the public sector may have caps on the amounts for which they can be held liable, or immunity from suits. Also, there are some coverages required by statute. For instance, private companies need D&O insurance to cover their directors and officers, but a public entity covers their public officials instead of directors and officers. While their basic exposures and risk factors are quite similar, the public entity-specific policies are worded specifically to insure these exposures.
How do caps and/or immunity from suits work for public entities?
In some states, there are caps on the amount of a claim against a governmental entity, capping its liability and reducing its costs. Many states have a per-claimant and per-occurrence cap. The cap differs by state and some states, such as California, have no caps. The caps would not apply to a claim in federal court if an entity is sued for discrimination, for example, and the caps do not apply to claims in other states.
Other states may have full immunity from certain suits, e.g., Michigan municipalities are immune from suits subject to certain exceptions, such as losses arising out of highways and sidewalks, motor vehicles and building maintenance, etc.
