When the Greeley City Council agreed in mid-January to settle with a plaintiff in a suit against the city, Roseann Perez, for $200,000, the number felt a little eye-popping.
While the city runs an annual budget in the hundreds of millions of dollars, out of which this settlement was a relatively small portion, it’s still notable that the taxpayer-funded entity had to shell out this kind of cash because of a police officer’s actions.
But it’s also notable where this money comes from. The city, like any entity of its size and breadth, is vulnerable to all kinds of liability, from someone tripping on a sidewalk to a dispute with police. It’s also responsible for millions upon millions of dollars of property, which sometimes falls into unexpected disrepair or breaks and costs money to fix.
That’s why the city, like most of its kind, has a system to pay for these liabilities when they require payment. The city’s liability fund, together with its internal service fund, total about $2.6 million most of the time, say the folks in charge of Greeley’s finances. That pays for lawsuit settlements, catastrophic insurance coverage, and anything from a broken window to a flat tire to a totaled work truck — and much more.
“Think of it like these are insurance dollars to pay for anything related to insurance or settlement claims, as well as premiums on our higher insurance rates,” said John Karner, Greeley’s finance director. “We have insurance on some catastrophic-type items, but up to a certain cost, we pay it ourselves. If the claim got too bad, we’d tap into our insurance.”
The liability fund itself is a refillable reserve bucket typically containing about $1.5 million. That reserve is maintained regularly to ensure that any big expenditures can be covered without eating into other funding.
“The target is typically that reserve balance set aside for emergencies at about $1.5 million,” said Robert Miller, budget manager for the city. “We estimate it’ll be right about $1.7 million when we close the books on 2021. The liability fund also covers any equipment issues where we’re at fault, or if there’s an accident or a repair to a building or water line. It all utilizes parts of this fund.”
Additionally, there’s an annual line item in the budget called the internal service fund, which is maintained and adjusted in every yearly budget process. This year that number is roughly $780,000, the city said.
Not all of that, it’s important to make clear, is for litigation.
But that’s where settlements come from. It’s paid for by all departments, Karner said.
Those settlements have gotten a bit more expensive in recent years, said city attorney Doug Marek, following legislation that increased litigation caps. That increase caused the city to increase the size of the fund, Marek said.
“When that happened, we anticipated the number of claims and of settlements and judgments going to trial would go up, and they did slightly. The same kind of analysis was done after the Police Accountability Act was passed last year by the general assembly,” Marek said. “The Governmental Immunities Act does limit the potential liability of a government entity unless there’s an exception in the law, and the Police Accountability Act does away with some of that limit. The other way is if it’s a federal court civil rights liability case, because tort claims don’t apply to federal constitutional claims.”
Marek and Karner both said it was common for cities to essentially self-insure in this manner, but said there are other ways to do it, too.
“Some participate in the Shared Risk Fund,” Marek said. “Weld County I believe does that. That’s a quasi-governmental thing, like an insurance company but funded by the government entities that are part of it. Cities obtain insurance through it and in those cases, the defense is generally mounted by attorneys for the insurance company. It’s different in Greeley, we’re more similar to Aurora, Denver — cities of that size. I believe Fort Collins has insurance, and I think many medium-sized cities and counties are part of that Shared Risk Fund.”
Marek said there are two categories for settlements. There’s one where, say, somebody falls on city property and makes a claim that they were injured because of some negligence of the city, Marek suggested.
“Same thing that would give rise to potential liability if you had guests at your home and they fell and say it was because your walk was icy and not shoveled,” he said. “If there are matters like medical expenses, so on, the code allows the city’s risk manager to settle those claims, for example, paying a medical expense up to $5,000. And a fair number of those don’t rise to the level of litigation but get settled from the reserve fund with the city’s risk manager doing that without additional authority.”
However, the second category gets bigger and broader.
“Claims go to the review board any higher than that,” Marek said. “The review board can offer settlements up to $50,000, and anything above that goes to City Council. It’s not a lot, maybe three maybe four a year. Then other claims end up in litigation. Those involve our office, the city attorney’s office. In the litigation process, there’s discovery, gathering of evidence, depositions of witnesses, and we’re constantly weighting the potential risks and rewards of going to trial. This recent case (with Perez) was negotiated prior to trial. Cases going to trial are also paid out of the liability fund. They’re very rare, though, because usually you can work out a settlement.”
Marek said the city does defend and indemnify city employees, including police officers, “when their actions are in the scope of their official duties.”
But if a criminal action is taken by a city employee, which Marek isn’t aware of having ever happened, then the city might have a basis to deny the indemnification for that employee. That wasn’t the case in the Perez settlement, though, he said.
That might change as the Police Accountability Act is interpreted, Marek said, noting that some immunity is stripped from officers in certain cases by that act, making officers personally liable in certain cases.
In any case, Karner emphasized, these are only some uses of the liability fund or internal service fund.
“It’s funded by all parts of the city — water and sewer, public works, police, even enterprise funds contribute a share,” Karner said. “That way there’s equal shares of risk, we’re all assuming it.”