Officials from Maryland's 155 cities and towns, facing a crisis over liability insurance that threatens to force many of them from office, called today for sharp limits on the amount of money residents can collect when they sue municipalities for negligence.
The proposal, endorsed by almost 200 officials at a meeting of the Maryland Municipal League, is one of several steps the league is recommending to combat skyrocketing insurance premiums and the abrupt cancellation of policies that protect cities and towns from lawsuits.
"We're talking about protecting individual assets -- my assets. That's the bottom line here," said Lloyd Helt, mayor of Sykesville, a small, central Maryland town hit hard by the crisis.
Helt was a star of sorts at the two-day meeting here. He and the Sykesville Town Council resigned en masse a few weeks ago when an insurance company abruptly canceled the town's liability insurance coverage.
Without insurance, Helt and the council members would have been liable for damages awarded against the city in a lawsuit. Their well-publicized resignations dramatically highlighted what officials say is a growing national problem.
"It's a crisis, absolutely," said Maryland Insurance Commissioner Edward Muhl, who spoke to the group on Friday. The league was meeting for its annual conference to establish legislative priorities for the Maryland General Assembly session in January.
Although it also considered issues such as voter registration and better enforcement of municipal infractions, the crisis over liability insurance dominated the discussions.
Along with Helt, many officials had stories to tell about rising insurance premiums and the threatened loss of insurance coverage.
"Our rates went up 300 percent," said Gaithersburg Mayor Bruce Goldensohn. "We beat the crunch. Some of the towns are in real trouble."
"We got insurance, but we're paying through the eyeballs for it," said Laurel Mayor Bruce Dipietro. "Overall we had 150 and 200 percent increases in our premiums."
In a recent survey of 57 Maryland municipalities, all but 10 reported substantial rises in insurance costs -- from 40 to 840 percent -- or the cancellation of one or more policies, said league executive director Jon C. Burrell.
One of those is Sykesville. Helt said premiums jumped from $1,200 to $8,000 a year even though its liability coverage fell from $20 million to $1 million, and its deductible rose from $1,000 to $20,000.
The problem, he said, has been caused by a growing number of lawsuits filed against cities, an erosion of sovereign immunity by recent court decisions, and financial problems in the insurance industry.
So far this year, 27 insurance companies licensed to do business in Maryland have become insolvent or have experienced serious financial difficulties. The figure is the highest since 1982, Muhl said.
Under the league's proposal, liability awards against cities and towns would be limited to $100,000, and lawyers fees would be limited to 20 percent of a settlement and 25 percent of a court award. In addition, the league agreed to study the feasibility of establishing a self-insurance program. Last week, the group asked Gov. Harry Hughes to set up a state-run insurance program or provide funds for a league-run program.