Liability Insurance to Deter Police Misconduct: Bad Idea or Panacea?

HB 1808 would require Texas police officers to hold their own professional liability insurance coverage in the event of misconduct claims, but not all are keen on the idea.

We’re familiar with the idea of individual physicians holding their own medical malpractice insurance.

This level of professional liability coverage is required by law in most states, and protects medical providers from potential liability arising from the injury or death of a patient. It enables the physician to have the coverage they may need and keeps the hospital or health facility running with no delay in care for other medical personnel and patients.

A new bill introduced in Texas proposes taking this idea of mandatory professional liability insurance and applying it to police officers.

Should a Texan officer be involved in some form of misconduct that warrants professional liability protection, the bill posits, the officer should be equipped with their own insurance as a condition of their employment.

The bill, HB 1808, was proposed in early February, sponsored by Houston-based State Rep. Jolanda Jones.

In news interviews, Jones said that “for far too long, law enforcement officers use their jobs to justify taking extreme, unjustified actions that kill our neighbors, friends and family.”

HB 1808 was inspired in part by the beating of Tyre Nichols by Memphis police on January 7, 2023, which resulted in Nichols’ death three days later.

A Deeper Look at the Bill

The Texas bill would prohibit law enforcement agencies from hiring an officer “unless the peace officer obtains and continuously maintains liability insurance to cover damages resulting from any misconduct, including intentional, negligent or willful acts” committed while on duty.

It’s a stark difference from, say, an agency obtaining law enforcement liability for the whole precinct.

With law enforcement liability, coverage for bodily injury, personal injury or property damage caused by wrongful acts committed by law enforcement would be covered.

Related Reading: After George Floyd’s Death, Can the Insurance Industry Rally to End Racial Bias?

Currently, individual officers are not responsible for procuring law enforcement liability coverage. Additionally, having this insurance is not a requirement for law enforcement agencies to operate.

Oppositions to the bill are already being vocalized.

“You would drive the working people out of the job — they wouldn’t afford the policy,” Charley Wilkinson, CEO, the Combined Law Enforcement Associations of Texas, told The Texas Newsroom.

There’s also fear that recruitment would drop due to “a burden of an additional cost or fee that police officers are required to pay.”

Misconduct and brutality are not inherent in every police officer — and the work officers do each day is high-stress, placing them in risky situations. Some worry a mandatory insurance policy like this would further curb individuals’ desire to enter the force altogether, for fear they will be unjustly targeted with misconduct lawsuits.

A Precedent? Or a Path Forward?

Rep. Jones has iterated that HB 1808 would alleviate taxpayers footing the bill when such litigation comes to light.

It is important to note, however, that police misconduct payouts rarely make headlines — instances like the $27 million paid to the family of George Floyd or the $12 million settlement in Breonna Taylor’s case notwithstanding.

For smaller cases with smaller sums, cities tend to resolve allegations discreetly, and the amount tends to be withheld from the public, though taxes often cover the costs. The Washington Post reported last year that “in total, 25 of the largest police and sheriff’s departments spent more than $3.2 billion to resolve claims of police misconduct over the past 10 years.”

A bill like HB 1808 would remove this layer of uncertainty by placing responsibility into the officers’ hands.

This is not the first time the idea of police officers holding their own professional liability policies has come to light. The year 2020 was a pivotal one in many ways, and particularly on the front of police reform. What began as peaceful protests after the murder of George Floyd soon turned into a national demand for better training for officers.

One solution, posited by Deborah Ramirez, a criminal law and procedure professor at Northeastern University School of Law, would be to require officers to be evaluated by actuaries to see if they had a high risk of using unjustified violence during policing. If deemed so, professional liability insurance should be mandated.

“As every driver needs insurance to drive legally, every police officer would need insurance to police,” Ramirez explained to Risk & Insurance® in 2020.

“Dangerous drivers are priced out of driving by high premiums, and police engaged in reckless or dangerous behavior would be priced out of policing by premiums that reflect the actual risk they pose.

“Police departments would pay the average premium. Officers would pay any increase over the base premium caused by their reckless behavior,” she said.

What’s Next

The proposed Texas bill is the first of its kind, and would make the purchase of professional liability insurance mandatory for an entire state. Individual cities, including Minneapolis, have tried to introduce similar bills, but largely have not found success.

For now, it’s a waiting game to see if Texas will move forward with the bill. Those interested can get a broader overview via reporting from Texas Public Radio here.

Understanding medical malpractice and how that works in the health care space may also give insight on how mandatory professional liability insurance for police officers would translate.

As for police officers or their agencies that are interested in understanding — or even using — professional liability insurance policies available to them, here’s one look at an option that’s already providing coverage. &

Autumn Demberger is a freelance writer and can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.