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PERSPECTIVES: New risks emerge for public entities

PERSPECTIVES: New risks emerge for public entities

As the U.S. economy begins to bounce back, and communities across the country start to consider new emerging issues, local governments must shift their focus to include key risks that potentially bring new liabilities and exposures. Joe Caufield, chief underwriting officer with OneBeacon Government Risks, discusses these new public-entity risks.

2014 is on track to be a year of major legislative change — especially when it comes to public entity liability. The past few years have been dictated by a sluggish economy, with governments focusing on budget reduction and deferred maintenance and operations. However, as the economy begins to recover, and citizens focus on (and approve) new laws, the public sector must contend with an entirely new set of key issues — namely, guns, drugs, police, money and oil.

New legislation in all of these categories is bringing the issues front and center into our communities. Concealed carry licensing, drug legalization, police activity, economic initiatives and energy resource development each affect government decisions and open the entity to new liability issues.

Concealed carry or carrying a handgun or other weapon in public in a concealed manner is authorized by license in the majority of states on a so-called “shall issue” basis. “Shall issue” means that the local government agency has no discretion, other than the criteria defined in the concealed carry licensing law, in awarding licenses. A number of well-publicized shooting deaths have placed a spotlight on this issue, resulting in increased citizen awareness and concern over the use of concealed carry licensing.

Communities face increased exposure to potential losses for alleged wrongful acts by public officials and law enforcement should communities elect to restrict concealed carry rights at parks, schools or courthouses at the local level, in conflict with state law. Some local government officials may lack the authority to change concealed carry laws and regulations defined by a state legislature. If they do not have that authority, advocates for or against individual gun rights will be quick to contest local restrictions.

One of the best ways local government officials can handle this issue is by seeking advice and detailed guidance from their respective state attorney general.

In 2013, Colorado became the first state to enact a law to legalize the regulated sale of recreational marijuana. It has been reported that the state anticipates millions of dollars of new tax revenues as a result. The law is controversial for many reasons, but especially because, although it may be legal in the state, marijuana still resides on the federal government's controlled substances list. However, numerous initiatives are being advanced in other states addressing liberalization of recreational marijuana.

Because state legislation is at odds with the federal government's controlled substances list, local governments may be challenged to make policy decisions in zoning, law enforcement or public park usage, all topics of local government responsibility, without much precedence or guidance.

Again, a strict reliance upon direction from the state attorney general's office is recommended, along with full utilization of local government legal resources. Local officials must not attempt to fill a regulatory void or reform state regulations through newly enacted zoning or local ordinance tailored for the legal marijuana industry unless they have specific authorization.

In Radley Balko's recently released book, “Rise of the Warrior Cop: The Militarization of America's Police Forces,” the author highlights an emerging trend in our local community police force: increasing paramilitary capabilities.

While local police departments have long included Specialized Weapons and Tactics, or SWAT, units and participated in joint operations with other law enforcement agencies for specific purposes such as drug enforcement, militarization capabilities have increased in recent years.

Many factors have contributed to this trend, including grant money provided by the U.S. Department of Homeland Security and U.S. Department of Defense surplus property dispositions, as well as the numerous law enforcement personnel with military backgrounds entering the field. Additionally, the justifiable interest of local forces in procuring the best available equipment and gear to protect the public has led to some local police adding weapons, vehicles and tactics that are unusual for community policing. An example includes the use of explosives in kinetic breaching instead of the more traditional manual battering ram.

The fact is that a local police department traditionally is not a military or paramilitary organization. The trend of leaning toward such capabilities can lead to allegations of excessive force and increase claims against law enforcement organizations. Public entities should rely on a clear definition of a local law enforcement agency's primary public safety role and not seek to emulate law enforcement response capabilities more appropriate of other local, state or federal agencies. All added capabilities that may fall outside the local government's core community policing mission should be very carefully evaluated.

Another emerging area of exposure for local government is an expanded entrepreneurial role for officials. The major professional associations for local government officials — the International City/County Management Association, the National Association of Counties and the National League of Cities — each promote and encourage community economic development initiatives by their members. Examples of encouraged initiatives include infrastructure such as roads or utilities, special tax-favored economic zones, joint ventures with professional sports teams and direct financial incentives.

While public officials are generally very skilled at leading their community and various governmental functions, they may not always be entrepreneurs. This can pose a problem as more community leaders begin to undertake economic development in so-called “proprietary” activities outside of mandatory local government responsibilities. Importantly, this trend can become a real liability exposure to local government, as those public leaders may not enjoy the same legal immunities in their economic development roles as they do as strictly public officials.

Public entities and local officials can help control the downside liability issues by enlisting the help of private-sector expertise. Enlisting direct investment by the private sector or seeking a partnership will help governments transfer risk to these other partners.

Domestic energy resource development is likely by far the most complex emerging exposure for local governments due to its wide-ranging impact on both the environment and economy and the already complex state and federal environmental and energy regulatory structure.

Resource development, such as using hydraulic fracturing technology, raises concerns for the environment in certain communities, particularly regarding groundwater pollution, toxic waste disposal and seismic activity. It also increases demand for public services such as roads and schools while at the same time offering potentially increased local tax revenue. Primarily a regional exposure in the Bakken, Marcellus, and Barnett shale oil and gas fields in North Dakota, the northeastern U.S. and Texas, respectively, the geography and communities affected by such endeavors continue to expand.

Local community leaders must protect the interests of their citizens by preventing negative impact to the community environment while still managing and encouraging economic growth. Energy development projects, especially those that occur rapidly, directly affect the traditional responsibilities of local government officials in public safety, education and roads. At the same time, increased tax revenues must be allocated to the best advantage of both short-term and capital projects that benefit the community.

In areas that are considering such resource development, local government officials are best advised to partner with environmental regulatory agencies. In this way, they can seek specialized expert advice and avoid becoming deputy environmental agencies or otherwise exceeding local government authority.

As the economy begins to bounce back and communities across the country start to consider new emerging issues, local governments must shift their focus to include these key issues that potentially bring new liability and exposure. A common thread to reducing potential loss arising from these emerging exposures is the reliance on a collaborative approach by state officials, outside specialist and experts, and the utilization of all available legal resources. Concealed carry licensing, drug legalization, police activity, economic initiatives, and energy resource development each require unique knowledge to fully comprehend and implement effectively and safely, often more knowledge than any one local official may have. By relying on the experts, along with already established risk management and safety programs, local governments can more successfully address the leading emerging trend categories affecting public entity liability — guns, drugs, police, money and oil.

Joe Caufield is chief underwriting officer at OneBeacon Government Risks, a member of OneBeacon Insurance Group. Based in San Antonio, he has 37 years of insurance industry experience, 27 dedicated to underwriting management of public entity insurance products and services. He can be reached at