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Friday, September 20, 2013

Why Do Joint Powers Organizations Need Insurance?

Imagine finding out late on Friday afternoon that your officers working on the multi-agency drug task force do not have liability insurance. That would make for a long weekend, right? Well, that is exactly what happened.

The cities and a county were involved in a multi-agency task force created by a joint powers agreement (JPA). The JPA created a separate “joint powers entity.” While each party had insurance for its normal operations, they presumed that their insurance coverage also applied to officers assigned to the task force.

The city’s League of Minnesota Cities Insurance Trust (LMCIT) workers’ compensation insurance usually covers the officers if they are injured while working for the JPA. However, the cities’ liability insurance specifically excludes damages arising out of a “joint powers entity.” This exclusion is not unique to LMCIT. Almost all commercial insurance policies contain similar exclusions.

There are a variety of reasons for this. One of the most important is that the liability for a joint powers entity is consolidated with the entity pursuant to one insurance policy. Plaintiffs frequently name all member cities of the JPA in their lawsuit. Consolidating coverage under the JPA avoids the expenses and inefficiencies of defending each city individually, and it prevents “finger pointing” when cities are being pitted against each other.

LMCIT has two helpful memos on our website that explain the details, provides a definition of what constitutes a “joint powers entity,” and outlines the differences between a mutual aid agreement, a contract for service, and a JPA. Links to those memos are listed below.

Liability Coverage for Joint Powers Agreements
http://www.lmc.org/media/document/1/liabilitycoveragejointpowers.pdf

Ten Things to Watch Out For When Entering Into Joint Powers Agreements
http://www.lmc.org/media/document/1/tenthingstowatchjtpwrsagmts.pdf

I also encourage you to contact LMCIT Risk Management Attorney Chris Smith with your JPA questions, or for contract review. Chris has both a wealth of information and the ability to explain the legal aspects of these agreements in manner that even I can understand. There is no fee for this service for LMCIT members. Chris can be reached at (651) 281-1269 or csmith@lmc.org


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In the meantime, stay safe and be careful.



Rob

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