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The Hardening Police Liability Market: Why Labor Shortages, Nuclear Verdicts and Increased Public Scrutiny Are Only Making It Tougher to Buy Insurance

As the market continues to harden, risk management solutions like body cameras and policies regulating excessive force can help lessen the sting.
By: | July 26, 2023

In 2020, during the aftermath of protests over police violence and misconduct, the Colorado legislature passed sweeping reforms that changed how officers in the state may be held accountable for wrongdoing by potentially making them responsible for paying up to 5% or up to $25,000 of a verdict with their precinct would cover the rest.

“What’s really interesting about the Colorado reform is that there is a component to it where a law officer could be held liable, personally liable, for misconduct or wrongdoing,” said Thanh Hoang, senior vice president and public entity risk solutions underwriter at Munich Re Specialty Insurance.

The law aims to reduce instances of police misconduct by making officers financially accountable. But it may also help address a problem that police precincts have faced for a number of years now: spiraling verdicts and an increased number of liability claims against law enforcement officers.

Laws written so that police officers and their municipalities share the financial liability for these claims can help reduce the burden on public entities and their insurers, which have struggled in recent years to manage the costs of defending misconduct lawsuits. A plethora of claims and a rise in nuclear verdicts has contributed to rising claims costs, and insurance carriers are adjusting their underwriting appetites accordingly. Other states, too, are looking into laws like Colorado’s to potentially reduce municipalities’ responsibility for some of these claims.

Public entities are seeing reductions to their liability limits, and carriers are looking to underwriting restrictions — or methods to hold other entities accountable — as a way of controlling costs.

In this tough, ever-shifting market, public entities need to take a look at their risk management practices and try to prevent claims from occurring.

Nuclear Verdicts Batter Already-Strained Police Departments

Thanh Hoang, Senior Vice President and Public Entity Risk Solutions Underwriter, Munich Re Specialty Insurance

A confluence of factors — viral instances of police misconduct, challenges to qualified immunity, delayed litigation as a result of the COVID-19 pandemic — have converged to create a heavily litigious environment for law enforcement departments across the country. Precincts are struggling with an increase in both the cost and volume of claims. Nuclear verdicts, some as high as $20 to $30 million, are becoming more common, according to Hoang.

In the past, these types of claims may have been limited to a few highly progressive municipalities with strict regulations around law enforcement. But over the past few years,

awareness of police misconduct and the dangers of excessive force has increased, and juries in all states are becoming more likely to deliver massive verdicts.

“Traditionally, you see the nuclear verdicts in challenging states such as California or Washington,” Hoang said. “​​Now, you’re starting to see these larger verdicts in other states.

Police departments are trying to recruit qualified officers in order to prevent these types of claims from occurring, but that, too, has been a challenge. The industry has faced a wave of retirements — they increased 45% during the one-year period ending April 2021 — and new recruits are electing for different career paths due to a low public perception of police officers.

“It’s not a desirable field to be in right now because of the negative perception that goes along with being an officer in today’s environment,” Hoang said. “It’s going to be a challenge to even recruit officers if there’s more of a financial burden or you hold officers more accountable.”

To address these talent shortages, police departments are trying to entice people to join the field by offering increased pay and improved benefits. “A lot of the agencies are significantly increasing their compensation package just to try to attract more officers,” Hoang said. “There’s even one agency in California that’s offering a signing bonus up to $75,000.”

A Hardening Law Enforcement Liability Market

Law enforcement liability claims have long plagued insurance carriers. Police departments face a bevy of exposures including lawsuits related to excessive force, vehicular accidents and other issues. But in the age of social media, where a negative interaction with a police officer can go viral in minutes, carriers are adjusting their appetite for the peril, putting public entities in a bind. After all, what town can function without a police force?

“With the increases of frequency and severity of claims and lawsuits ending in nuclear verdicts, we’re seeing a lot of carriers pulling back capacity,” Hoang said. “Just a little bit over five years ago, carriers were offering up to $20 million in law enforcement limits. Now, $5 million in limits is becoming the new norm.”

If an insured needs more than $5 million in limits, they’ll have to work with multiple carriers. That can be tough to achieve since some carriers are withdrawing entirely from the space — though, according to Hoang, there are some new entrants as well.

Whether an insured is working with an established carrier or a new entrant in the space, their application will likely face increased scrutiny. Insureds should prepare for inquiries about their officer training practices, excessive force policies and other risk management strategies.

“Carriers are increasingly asking more questions about law enforcement,” Hoang said.

Beyond reduced limits, public entities can expect new restrictions on their policies. Some carriers are excluding or restricting things like high-speed pursuits in an attempt to rein in claims costs. Due to public safety concerns, some states have passed laws restricting pursuits, and more agencies are limiting pursuits.

“In recent years, we have seen carriers adopt a stance where they’re excluding law enforcement in their liability coverage and requiring insureds to purchase stand-alone law enforcement liability policies,” Hoang said. “Though this practice isn’t as common.”

Some states are looking into laws requiring law enforcement officers to carry their own professional liability coverage, similar to how doctors purchase their own medical malpractice insurance. Another way, municipalities and their insurers aren’t bearing all of the financial responsibility for police misconduct claims.

Texas lawmakers recently introduced House Bill 1808, which would require the state’s police officers to purchase professional liability policies as a condition of their employment.

Delivering Trusted Risk Management Solutions

In the face of increased perils and a hardening market, public entities are searching for risk management strategies that can help reduce the risk of a claim and make their exposures more attractive to carriers. Tools like body cameras, pursuing accreditation, and implementing standardized use-of-force practices and training policies can all help public entities reduce the risk of a law enforcement liability claim.

With over 30 years of experience writing public entity accounts, Munich Re Specialty Insurance’s Public Entity Risk Solutions team is well versed in the risks municipalities and their police departments face. The company’s tailored solutions-oriented approach can help law enforcement teams find the risk management and liability insurance policies they need to navigate today’s shifting claims environment.

One risk management tool recommended that precincts use is body cameras. These tools record officers’ interactions with the public while they’re on duty and can be used to prove that an officer is innocent, if they’re accused of misconduct. The use of body cameras led to a 17% decrease in the number of complaints of misconduct police forces faced, according to a 2021 study by the University of Chicago’s Crime Lab and the Council on Criminal Justice’s Task Force on Policing.

“Body cameras could be used as a defense in terms of providing evidence against claims of police misconduct,” Hoang said.

Other law enforcement agencies are seeking accreditation as a way of showing insurers they are at low risk for a claim. Accreditation systems help ensure police officers are receiving adequate education and training, yet less than 20% of law enforcement agencies are accredited at the state level, and little over 5% are accredited by CALEA in 2020 , Hoang said. “There’s been not only a state push but a federal push to have law agencies get accredited,” he said.

Another strategy that has seen some success: community policing. In a community policing model, officers develop relationships with residents and engage with them to solve problems. This model can help improve relationships between officers and their communities, hopefully leading to a reduction in accusations of police misconduct. A 2019 study of community-oriented policing in New Haven found that these strategies increased positive attitudes toward police officers among community members and that the effects persisted over time.

“We’re seeing a lot of positive feedback on community policing,” Hoang said. “Having a better relationship with the local community and the police department can help drive positive results.”

Whatever risk management strategies public entities use to manage law enforcement liability exposures, it’s important to work with a trusted carrier to implement these programs and understand the effects they can have on insurance costs. In today’s tough market, insureds will want to use every tool available to reduce the risk of a claim.

To learn more Munich Re Specialty Insurance’s Public Entity Risk Solutions, visit: https://www.munichre.com/us-non-life/en/solutions/specialty-insurance/public-entity-risk-solutions.html

Munich Re Specialty Insurance (MRSI) is a description for the insurance business operations of affiliated companies in the Munich Re Group that share a common directive to offer and deliver specialty property and casualty insurance products and services in North America. For more information on MRSI, including licensing, regulatory-required, and other information on the operating companies, please click here.


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

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