CJAC: Civil Justice Association of California

Oct 20, 2008

Local Government Liability: A Major Cost and Exposure

By John Wilson

If there was any doubt that civil liability is costing local governments big money, it was removed by a study just released by School Services of California, Inc. The respected school consulting group surveyed 650 K-12 school districts representing more than half the students in the state and found that the price tag on defending, insuring, and paying tort and other liability claims is running $80 million annually.

That is enough money to triple the number of librarians serving the state’s 8,000 schools, or to double the number of school nurses. It is more than half the total money districts are receiving from the state to purchase new books! It is more money than the schools were receiving from the state in the mid-1990s to help with deferred building maintenance!

No one suggests that the $80 million can be reduced to zero. Schools’ diverse activities inevitably result in legitimate negligence liability. But schools, like every other local government entity in contact with great numbers of people, are a “deep pocket” target for the kind of speculative lawsuits used to force settlements out of defendants of all kinds.

As head of an organization that covers school districts against very big losses beyond their normal coverage, I continually see imaginative attempts to find new reasons to make schools liable for harm that has befallen someone.

Late last year, the California Supreme Court turned back one such attempt. It involved a suit against Vacaville Unified School District for damages in an off-campus accident involving a student driver. The plaintiff was across the street from the school when he was struck by the car and his lawyer claimed the school should be liable because the student was driving negligently when he left the school parking lot.

While it is a tragedy when anyone is injured anywhere in a traffic accident, it is easy to see how schools (and the taxpayers supporting them) would become frequent victims of unfair lawsuits were the court to endorse a theory that schools and their staffs had some responsibility for the injuries students might cause driving off-campus.

While Vacaville Unified prevailed in this case, it can never recoup the staff time demanded by two levels of appeals. And the substantial legal defense expenses will figure in future insurance costs.

The School Services study, conducted for the Association of California Tort Reform, found three effects flowing from civil litigation: (1) the dollar cost, draining financial resources desperately needed in crucial areas to directly benefit students; (2) operational constraints, resulting when the fear of litigation causes districts to abolish worthwhile educational programs; and (3) personnel constraints, a reluctance to act against under-performing employees because of the cost and burden of a termination process that can in each instance consume years of administrative staff work and hundreds of thousands of dollars in court costs.

California stands out among other states when it comes to litigation against school districts. One insurance manager for a national company told School Services that “California is extremely expensive from a litigation standpoint. I just shudder at the legal expense in some of these files. In Arizona or Colorado if we have a filing that exceeds $100,000 in legal fees, that’s a big ticket case that everyone knows about. In California those cases are a dime a dozen. I think more than anything, it’s just a different atmosphere. Plaintiffs have a different mind-set.”

John Wilson is the executive director for Schools Excess Liability Fund (SELF), a statewide joint powers authority providing excess liability and workers’ compensation coverage to more than 1,000 California public educational agencies.

Wrongful termination, discrimination, and sexual harassment are areas the study identified as sources of increasing litigation in many districts. Happily, a majority of districts reported that suits over faulty equipment, physical education, and sports programs declined over the 1995-98 period encompassed by the study.

The study found some general factors driving liability claims against school districts. Risk managers cited a “heightened litigious temperament” in districts in transient communities while charter schools appear to be better than average risks, evidently because they enjoy more active participation of the community and students and parents are less inclined to sue them.

Risk managers reported an inverse relationship between a robust community and the volume of litigation. They were quoted as saying: “Whenever economic times are bad you see people seeking remedies….it’s like they feel ‘somebody’s going to pay.’”

And some risk managers said they can trace many of their less meritorious cases to a small number of local attorneys, doctors, or chiropractors who actively encourage such suits.

The overall situation can be improved by more focus on risk management and fine tuning some of the laws that right now make it profitable for some attorneys to bring farfetched claims that all too frequently win settlements. For Governor Gray Davis to achieve his school accountability goals, he may well have to become involved in improving the laws that right now make terminating inadequate teachers and administrators a long, costly nightmare.

The governor and Legislature should be concerned in the coming months about legislative proposals that would increase the liability expenses of schools and all other local governments. Court rulings such as the Vacaville Unified opinion are now providing some protection against expansive lawsuits over recreational injuries, so-called “premises liability” for unfortunate events that happen to occur on public property, and insurance lawsuits alleging “bad faith” settlement practices. These suits directly or indirectly drive up every local government’s costs significantly.

These beneficial rulings could be overturned by legislation.

In the months ahead, all local governments need to increase their vigilance and be ready to fight legislation that could result in fewer services and higher costs to their constituents.

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