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Insurance protects budgets, property, workers and residents

Cities face risks every day. From human resources issues to infrastructure failures and law enforcement incidents to cyberattacks, the responsibility for identifying and mitigating these risks lies with city councils to set policy and with staff to carry out the policy. Proactive risk management policies are central to protecting a city or town’s assets.

What types of insurance coverage should cities have?
State law requires employers to provide insurance to pay the cost of medical expenses and lost wages of employees who are injured on the job. Workers’ compensation insurance limits the city’s exposure while providing protection for its employees.

Employees are entitled to receive non-taxable compensation equivalent to 66 2/3 percent of their average weekly wage for up to a maximum of 500 weeks. Medical expenses, such as surgery, hospitalization and prescriptions, are examples of the cost the insurer pays on behalf of the city for employees.

Property and liability insurance offers coverage for property the city owns, such as buildings, cars and equipment. It also covers claims resulting from damages caused to a third party due to an accident or the action of a city official. Examples of claims covered by property and liability insurance would include a slip, trip or fall by a resident; an excessive-use-of-force claim by law enforcement; or a land use claim.

Why should city officials be concerned about risk management and mitigating risk?
City officials must keep the city running. It’s not just a city’s buildings, vehicles or other tangible property that are at risk. Intangibles, such as the city’s reputation, can be at stake. Officials must determine their loss exposures by identifying what is at risk for loss, threats that could cause a loss, and the potential consequences to residents if the city is unable to provide critical necessities, such as water, electricity and public safety.

City officials also purchase insurance to transfer risks so that the city does not assume responsibility for an asset or activity and bear the responsibility for any losses. A good example of this would be obtaining a certificate of liability for vendors that perform construction activities on behalf of the city.

What are the consequences of a loss for cities?
Losses not only bring financial consequences but can also affect a city’s ability to provide essential services to residents.

A city can also face serious financial trouble if it does not have coverage for an occurrence, or if the city incurs costs outside of the insurance policy’s coverage limits. Some cities have made up the differences by dipping into their general funds or liquidating assets.

What risks should now be on the radar of city officials?
Law enforcement liability claims and the cyber liability claims are currently major issues. In the event of a law enforcement liability claim, such as an officer-involved shooting, officials will be required to respond to the incident while navigating the internal and public relations challenges that result from these costly claims.

Large employers and banks have been the targets of cybercriminals, but attacks are now shifting toward local governments and other service-oriented organizations. City officials must understand the risks associated with a cyber breach and develop a contingency plan.

The Association’s Risk Management Services programs will offer Risk Management 101 for members of the SC Municipal Insurance Trust and the SC Municipal Insurance and Risk Financing Fund on May 9, 10 and 11. Participants will learn the fundamentals of the workers’ compensation and property and liability programs. For more information, contact Venyke Harley at or 803.933.1210.