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HomeMy WebLinkAboutItem 5.3 Fair Responsibility Act of 1986 CITY OF DUBLIN AGENDA STATEMENT CITY COUNCIL MEETING DATE: November 12, 1985 SUBJECT Resolution Supporting the "Fair Responsibility Act of 1986" EXHIBITS ATTACHED Letter from League of California Cities dated October 21, 1985; Letter from Taxpayers for Fair Responsibility dated October 28, 1985; Resolution RECOMMENDATIONI Adopt Resolution FINANCIAL STATEMENT: None DESCRIPTION As you are aware, the League of California Cities has been attempting to reach a compromise with the California Trial Lawyers Association in order to facilitate a change in the "deep pocket" doctrine which has affected liability insurance coverage for cities. In an effort to approach the insurance crisis for cities in another forum, a Tort Reform Initiative titled the "Fair Responsibility Act of 1986" has been submitted to the State Attorney General. This initiative is being sponsored by a coalition called the Taxpayers for Fair Responsibility and includes the County Supervisors Association of California, the League of California Cities , the California Chamber of Commerce, the California Taxpayers Association, the California Medical Association, the California Hospital Association and the California Manufacturers Association. This initiative would limit liability of cities by providing that a city in an accident lawsuit would only pay that percentage of the injured persons non-out-of-pocket damages in accordance with the city' s responsibility for that accident. It is Staff ' s recommendation that the City Council adopt a resolution endorsing this initiative. ---------------------------------------------------------------------------- COPIES TO: ITEM NO. S. 3 League of California Cities 4 m m ft 1400 K STREET • SACRAMENTO,CA 95814 • (916)4445790 OCT 3 California Cities 1985 Work Together Sacramento, CA October 21, 1985 MEMORANDUM TO MAYORS, CITY MANAGERS AND CITY CLERKS IN NON-MANAGER CITIES (PLEASE PASS ALONG TO COUNCIL MEMBERS AND DEPARTMENT HEADS) Dear City Official: The crisis in liability insurance coverage is reaching dramatic proportions. Many of you have been along for the long hard fight to gain reforms through the Legislative process, which to date has been unsuccessful. Negotiations are continuing on SB 75 (Foran) and AB 1332 (W.Brown) to reach a compromise with the California Trial Lawyers Association, the chief opponents of any change in the Deep Pocket Doctrine. Officials need to continue to ex- ert pressure on their Legislative representatives to enact satisfactory legislation. On another front, a tort reform initiative has recently been submitted to the State Attorney General and has been titled the "Fair Responsibility Act of 1986". Movement is now under way to collect the necessary signatures to qualify this initiative for the June 1986 ballot. The League Board of Direc- tors has voted to support this measure and the voting membership added their support in the form of an Annual Conference resolution passed earlier this month. With this in mind, we are providing the attached information for your use in speaking to your Legislators, the public, and the press in the very vital at- tempts to inform the voting public so as to rectify the inequities cities face under the current deep pocket doctrine. The League will continue to keep you updated on the progress on each of these fronts. If you have need for further information or details, contact Conni Barker in the Sacramento office. Sincerely, Pat Russell ,. Don Benninghoven Council President, City of Los Angeles Executive Director and President, League of California Cities I r CLOSING THE DEEP POCKETS Tort Reform — The Fair Responsibility Act of 1986 Liability Insurance Crisis As city officials are all too aware, we are facing a crisis in the area of liability insurance. Our cities are experiencing rate increases of 100-500- 1000 percent. Many cities can no longer afford to carry insurance. Or, even worse, can find no insurance carrier to cover municipal liability. Deep pocket judgments, simply stated, mean that when more than one defendant is involved and any of the defendants is unable to pay, the remaining defen- dants must pay 100 percent of the cost. In practice, that means cities, counties and other entities with substantial pocketbooks are increasingly being named in lawsuits where they have little or no responsibility, merely to provide a "deep pocket" capable of paying the judgment. Some examples: A young man dives into an ocean sand bar off a city beach, suffering in- juries which leave him a quadriplegic. He sues, claiming the city should have posted signs warning him it was dangerous to do so. The jury awards him $6 million. A motorist with a blood alcohol level of 0.32 percent -- three times the maximum allowable legal level -- is injured when his car, traveling 60 mph in a 30 mph zone, hits water on the pavement and crashes. He sues the city for $2 million. A driver with a blood alcohol level of 0.17 is killed when his car runs off the end of a dead end street and over a railroad embankment 100 feet from the road. His survivors sue the city, claiming "dead end" signs were improperly placed. These cases have become an increasing drain on the taxpayer. In a survey com- pleted early this year, the League found. 163 cities -- slightly more than one- third of the cities in the state — reported paying out $20.1 million in "deep pocket" judgments in 1983-84. (This figure does not include the $6 million judgment in the diving case mentioned above which was decided after FY 1984.) The 163 cities paid $5.1 million in such claims in 1981-82 and $18.2 million in 1982-83. They estimate they face a combined potential exposure amounting to more than $210.7 million for cases that will come to trial in the next few years. Some cities, such as Laguna Beach and Dixon, face potential judgments which could exceed their total annual budgets. Although most cities cover part of each judgment or settlement by insurance, a major portion must be borne in the city's deductible (usually $100,000 to $500,000) , and the insurance premiums of the cities have skyrocketed. Since a city, in most cases, is unable to increase taxes in a sufficient amount to cover the losses, it must cut other parts of its budget. The cost of such payments is only part of the story. The bill among respond- ing cities for defending such cases amounted to more than $15.8 million over the last three years, and that figure does not include costs borne by the in- surance carrier in many smaller cities. Legal Background Current law has resulted in a head-on collision between the public policy in favor of compensating injured persons and the strong public policy that local governments must not be stripped of the resources needed to conduct the public's business. In an attempt to ensure that victims were assured compen- sation — even if those at fault were uninsured -- the courts in 1978 ruled that all defendants were liable for the judgments regardless of percentage of fault. For example, assume the plaintiff is 30 percent responsible, one uninsured defendant 60 percent responsible and the city 10 percent responsible. Under the Supreme Court ruling in the American Motorcycle case, the plaintiff receives 70 percent of his or her damages from the city and the city recovers nothing from the 60 percent responsible defendant. Legislative Attempts to Reform In each Legislative session since 1981, attempts to reform the deep pocket doctrine have been introduced and have yet to be successful. (SB 75_(Foran) is still pending in the current session, with dim chances of passage.) The horror stories have compounded over the years, as cases heard under the new court ruling have been decided. Public pressure is mounting and must continue to be levied against those legislators still unwilling to compromise. Fair Responsibility Act of 1986 Given this history, concerned government and business leaders have coalesced to take the issue to the people. The "Fair Responsibility Act of 1986" has been reviewed by the State Attorney General and proponents are now gathering signatures in order to qualify this initiative for the June 1986 ballot. The "Fair Responsibility Act of 1986" limits liability by providing that a defendant (a city) in an accident lawsuit pays the percentage of the injured j person's non-out-of-pocket damages equal to the defendant's contribution to the accident. For example, a 10 percent responsible city would pay 10 percent of the money a jury awards for pain and suffering. The measure does not change the rule that a defendant may still have to pay up to 100 percent of the injured party's medical bills and wage loss. 2 - TAXPAYERS for FAIR RESPONSIBILITY 111 Anza Boulevard,Suite 406 Burlingame,California 94010 (415)340-0470 County Supervisors Association of California League of California Cities October 28 , 1985 R L California Chamber of Commerce California Taxpayers OCT 30 1985 Association California Manufacturers CITY C`P Association Dear City Official: Association for California Tort Reform California Medical You recently received information from the Association League of California Cities outlining the California Hospital effort by a coalition of government, business Association and health care organizations to change Association of California California's unfair "deep pockets" law. This Insurance Companies Alliances coalition--Taxpayers for Fair Responsibility-- of American Insurers includes the County Supervisors Association of (Partial Listing) California, the League, California Chamber of Commerce, California Taxpayers Association, John H. Hodgson II, California Medical Association, California Treasurer Hospital Association and California Manufac- I.D. #850827 turers Association. The initiative supported by the coalition, the Fair Responsibility Act of 1986 , contains virtually the same provi- sions as SB 75 . Your assistance is critically important to the success of this effort. The support of each council member individually, and the collec- tive endorsement of every city, will help the public to realize that "deep pockets" is a taxpayer issue--and that reform will mean the savings of millions of taxpayer dollars. The League, by resolution at its annual meet- ing, has made "deep pockets" reform a top priority. You can help immediately in the following ways : 1) Sign and return the enclosed endorse- ment card 2) Help persuade your full council to adopt the enclosed resolution. We would like to have resolutions from all boards by December 1. -When it is passed, please send a copy to the Campaign office. 3) Contact 5 to 10 key community leaders to help with this effort (service club presidents; key business and profes- sional people,etc. ) . 4) Contact your local state legislators-- both Assembly and Senate members--and ask them to endorse the initiative. - 2 - 5) Circulate petitions'. If you would like to help collect signatures , please contact the Taxpayers for Fair Responsibility Campaign office at (415) 340-0470 . All time spent by city officials on qualifying or advocating this ballot measure must be volunteer time. No city money, staff time, or city resources may be spent to qualify the initiative. Citv money and resources , including staff time and office equipment, may be spent to provide objective information on ballot measures , but not to advocate. Viola- tion of these prohibitions can result in both civil and criminal penalties. Working together, we can restore fairness to the law and save our cities millions of much-needed taxpayers ' dollars. Please contact Ethie Weaver , State Field Director, at the Campaign office if you need additional information. Sincerely, c Richard S. Woodward Campaign Manager Taxpayers for Fair Responsibility Enclosures RESOLUTION NO. - 85 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN -------------------------------------- ENDORSING THE FAIR RESPONSIBILITY ACT OF 1986 WHEREAS, the present joint and several liability law, also known as the "Deep Pocket Doctrine", has unfairly cost the cities of California millions of dollars in court judgments, settlements , legal costs, skyrocketing insurance premiums and difficulty in obtaining adequate liability insurance coverage; and WHEREAS, this same doctrine has also cost other governmental bodies, business firms and professionals many millions of dollars; and WHEREAS, many cities, other governmental bodies, business firms and professionals are selected as defendents in lawsuits merely because of their perceived assets or insurance and often are found only fractionally at fault but must pay most or all of the judgment because the defendants most at fault cannot pay; and WHEREAS, the "Fair Responsibility Act of 1986" is an initiative measure that would give the voters of California an opportunity to reform the inequities and injustices of the "Deep Pocket Doctrine" by holding liability lawsuit defendants financially liable in closer proportion to their degree of fault. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby endorse the "Fair Responsibility Act of 1986" and urge its support and passage to relieve the financial strain imposed on local government and its taxpayers. PASSED, APPROVED AND ADOPTED this 12th day of November, 1985. AYES: NOES: ABSENT: Mayor ATTEST: City Clerk