This article was produced in partnership with Munich Re America.

Jia snap Insurance Business America I sat down with Lauren Tredennick, Head of Public Entity Risk Solutions at specialist Munich Re, to discuss the impact of abuse of the legal system and litigation environments on public entities and how insurers are adapting to this trend.

Public entities, including government agencies, municipalities, and educational institutions, face an ever-increasing wave of liability risks.

The rise of abuse of the legal system (also known as social inflation) and the increasing costs associated with litigation resulting from large jury awards make public entities vulnerable because of their visibility and, unlike private companies, they often operate with far fewer financial resources.

As jury awards mount, public entities must face more stringent insurance coverage requirements or increased liability coverage premiums, exacerbating their financial burdens.

“It’s a really interesting time for public entities,” said Lauren Tredennick (pictured), head of public entity risk solutions at specialist Munich Re. “The challenges public entities face today are some of the same challenges we have seen, only made worse.”

Public entities must look for new ways to address these growing challenges.

Reducing the risks of escalating liability in “judicial hell”

Location plays a critical role in a public entity’s vulnerability to breaches, with so-called “jurisdictional loopholes” experiencing a higher risk of claims.

“Settlements that used to be less than $500,000 are now $3 million or $4 million,” Tredenick said. “If you have an account located in one of the higher litigation areas, that will raise your claim values.”

It’s a grim reality check for entities struggling with rising liabilities and shrinking budgets.

High litigation costs, including legal fees and settlement payments, strain the financial resources of public entities and divert funds from essential services and infrastructure projects. Moreover, protracted legal battles can erode public trust in government institutions, affecting their credibility and reputation.

While damage caps and immunities can help mitigate risks, the overall environment remains a concern for insurers and public entities.

Forming partnerships is vital to building resilience to liability risks

Amid the challenges, Tredinnick stressed that public entities can thrive by taking a proactive approach to risk management that includes documentation, employee training and standards enforcement.

“Public entities must master the basics,” she said, highlighting the value of strong risk management programs and strategic partnerships.

Choosing the right legal counsel and insurance providers is essential, given organizations’ limited resources.

“Public entities often must obtain board approval to obtain funds and have strict rules to follow while working within limited budgets,” Tredinnick said. “As unique exposure situations arise, public entities must be creative and flexible with their options and coverage opportunities that fit the constraints within which they operate.

“This goes both ways; It is also the responsibility of brokers and insurance partners to provide flexible options so that public entities can respond when exposures arise.

Understand their exposure and regulatory environment

Public entities must keep pace with evolving laws and legislation, such as law enforcement qualified immunity laws and statutes of limitations for sexual assault claims, to remain compliant in a dynamic regulatory environment.

“The municipality needs to understand what law enforcement can and cannot do, and what its policies and procedures need to be updated in the context of current law reform,” Tredinnick said.

“Schools or similar public entities need to understand their vulnerability to sexual assault allegations. They should be aware of revival laws and statutes of limitations, and how these laws should impact documentation, employment, and claims practices.”

Choosing the appropriate insurance solution

Finally, Tredinnik touched on cooperation with insurance companies and brokers. Choosing the right insurance product is crucial in mitigating risk. However, comprehensive, tailored coverage and additional services will go a long way in positioning public entities to weather the waves of legal and regulatory changes.

“It’s not a simple insurance product for public entities anymore,” she said. “You want to look for additional services in the form of education, whether that’s webinars, in-person conferences, training, white papers, or access to loss control services. (WLMU1)