On August 25, 2023, the Eighth Circuit held that a municipality does not waive statutory caps on damages for governmental tort liability when it procures a policy that provides a limit of $500,000 for claims subject to Minnesota’s statutory cap on municipal tort liability, and a separate $2,000,000 limit for claims that are not subject to the cap. Prisk v. Travelers Indemnity Co. of America, __ F.4th __ (8th Cir. Aug. 25, 2023).
The Eighth Circuit reversed the order from the district court, which had held that by procuring any coverage in excess of the statutory cap, the municipality necessarily waived the statutory immunity cap with respect to all claims.
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The Details: By way of statute, the Minnesota legislature has provided that certain claims against municipalities are subject to a $500,000 statutory cap on liability. Minn. Stat. § 466.04. This statute represents a legislative balancing of the interests of an injured person and that of the municipality spending public funds to procure insurance (or being exposed to liability in excess of insurance).
A municipality may waive the statutory limit of liability by obtaining insurance coverage for damages “in excess of the limit of liability imposed by section 466.04.” Minn. Stat. § 466.06.
Certain claims, such as federal tort claims (including § 1983 claims) and claims governed by the law of a different state, are also not protected by the cap.
In Prisk, the City of Hermantown had procured an automobile insurance policy from Travelers. The declarations page of the policy provided that “[t]he most [Travelers] will pay for any one accident or loss” is $2,000,000. An endorsement to the policy, entitled “Statutory Cap Limits of Insurance Endorsement – Minnesota,” expressly modified the coverage limit stated on the declarations page, and provided that the limit of insurance was $500,000 for damages (1) “[r]esulting from any one ‘accident’ and sustained by any one person or organization that is determined to be a claimant under … Minnesota Statute Section 466.04” and (2) that “are subject to Minnesota’s statutory cap on damages for governmental tort liability in … Minnesota Statute Section 466.04.”
Prisk was injured when he was struck on his bicycle by a vehicle owned by the City and driven by a city employee. His personal injury claim was one subject to the $500,000 statutory cap. But Prisk argued that the City waived the $500,000 statutory cap by procuring limits of $2,000,000 for claims that are not subject to the statutory cap. In other words, because the City had procured $2,000,000 of coverage for claims that did not fall within the statutory cap, Prisk argued that the City waived its immunity for all claims, even those otherwise subject to the statutory cap.
The Eighth Circuit disagreed, holding that the Policy could provide two separate limits and that by obtaining separate limits the City did not waive the $500,000 statutory cap on liability. The court reasoned that “[t]he substance of this contractual arrangement is no different than if the parties agreed on two separate policies for two different types of liability.”
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After Prisk, the language of the insurance policy matters. The Eighth Circuit distinguished its holding in Prisk from the outcome in Frazier v. Bickford (D. Minn. Oct. 15, 2015). In Frazier, the policy provided coverage up to $5,000,000. The policy then included a “non-waiver provision” stating that nothing in the policy “shall be deemed a waiver of any statutory immunity or limitation of liability.” The district court ruled that the mere act of procuring insurance in excess of the statutory cap ($5,000,000 instead of $500,000) waived the statutory limit, and that the contracting parties could not nullify that waiver by including a “non-waiver provision.”
The Prisk court distinguished the language in the Traveler’s policy from that in Frazier, holding that the Traveler’s policy did not provide excess coverage for claims that fell within the statutory cap and then subsequently try to limit that coverage. Rather, the Traveler’s policy only ever provided coverage of $500,000 for claims subject to the statutory cap on liability.
In cases where Minnesota’s state and federal courts have found that a public entity has waived the § 466.04 liability cap with respect to a claim that is otherwise within the cap, the courts have been concerned that when a public entity spends public funds to purchase coverage that applies to a claim and the coverage is in excess of the otherwise applicable § 466.04 liability cap, the public entity should be covered up to the limit of the coverage that it purchased. The statutory liability caps are in place to protect the resources of a municipality and not for the benefit of the insurer.
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The members of Arthur Chapman’s Insurance Coverage Group are ready to walk you through your insurance coverage questions.
Beth Jenson Prouty submitted an Amicus Brief on this case for amicus curiae American Property Casualty Insurance Association (APCIA).
