Insurance Policies Lead To Police Reform

For months now I’ve silently listened to community members in cities I’ve visited claim that issues surrounding Black & Brown Communities don’t affect those in more prominent white communities.  Those community members specifically stating that because these issues don’t affect them, they don’t need to get involved.  The excuses run high throughout white communities as they hide in their houses and pretend they are not affected.  Or do they really not know how much they are actually affected by police misconduct in Black and Brown Communities. I’ve watched community members raise money for their local police departments showing their continued support for these departments not having the funding needed to obtain vital equipment to do their daily job that we hold in such high esteem.

But I have often wondered over the course of these last several months if those claims are accurate.  If one person in the community is affected then it would ultimately have to affect everyone right?  We focus so much of our attention on those who we know to be openly racist condoning the injustices of Black, Brown & Indigenous people in our communities.  We rarely focus our attention on the majority of white communities that are uneducated as to what the issues are and how we are all affected.  If departments don’t have enough money to obtain body cameras, K-9’s and Tasers, how are they able to afford military grade weapons and vehicles, especially if they are paying out millions of dollars in excessive force lawsuits and wrongful death lawsuits.

What if I told you it actually affected your pocket more than you think it did?  What if those community generated donations weren’t actually needed because the funds were readily available and if they weren’t, funding would get pulled from somewhere else?  Would you get more involved then?

In most cities and counties, civilian payouts for police misconduct come from general funds and not from police department budgets.  Civilian payouts for police misconduct put a strain on local governments and absolve police officers of culpability.  Current law enforcement protocols hold officers internally accountable, but they are not externally held accountable to the communities they serve.  Settlements don’t impact law enforcement agencies if it comes from general funds, meaning its citizens are responsible for paying these large settlements.  We usually see this in increased property taxes as well as other sneaky ways municipalities collect from their citizens to contribute towards settlements.  Civil payouts for police misconduct have little impact on police departments.  Little changes, with their normal budgetary operating procedures.  It does not have an impact on hiring and rarely impacts firing.  When departments self-insure it renders them relatively impervious to market forces.  However, these monies do impact city budgets in other ways.  Cities are paying millions of dollars in civilian payouts for police misconduct from taxpayer money that could be used for education, health, social services and infrastructure.  Some say police department liability insurance will take the burden off of taxpayers, particularly in struggling cities, and place the accountability on police departments and police officers who commit the misconduct.  But will it really?

Most law enforcement agencies receive money in their budgets that is reserved for litigation costs and is isolated from other aspects of their budget.  When these agencies do not spend as much as they have budgeted for litigation, the departments may not be able to use those funds for other purposes; the funds are sometimes kept in litigation budgets to cover future costs and are sometimes returned to the jurisdictions general funds but this rarely happens.  When departments go over their budgeted litigation costs, they can get additional funds from the government to satisfy those claims, or pull from the City Account into Police to cover claims.  Money would not be taken from law enforcement budget if doing so meant compromising a need within the budget for personnel, supplies, services etc.  When faced with large police payouts, jurisdictions have been known to compromise other aspects of city or county services while preserving their law enforcement agency’s budget.  Most law enforcement agencies that pay settlements and judgments from their budgets still need approval from the city or county, mayor, or legislature before settling the case which more often than not the city almost always approves.

By shifting civilian payouts for police misconduct away from taxpayer money to police department liability insurance policies it takes some of the burden off of its citizens.  Generally, when a police department applies for insurance coverage, it has to attach copies of its most important policies, like its policy on the use of force.  If the insurer doesn’t like what it sees, or if too many critical policies are missing or incomplete, it can deny coverage or charge a higher rate until the agency brings its policies up to snuff.  Insurers also work with agencies to improve their policies, or even offer packaged model policies and procedures.  They provide access to online and video training materials or connect police departments with consultants who teach classes on how to do the job in a way that’s both effective and minimizes financial exposure.  They also subsidize the use of otherwise prohibitively expensive training equipment like use-of-force virtual reality simulators.  Some insurers also offer discounts for agencies that obtain accreditation, and the accreditation process itself requires the agency to satisfy a large number of standards in all different areas of practice and administration.  The insurance premiums however are not always paid directly from law enforcement budgets, but again from the general funds.  Insurance companies can do a lot of good in reducing police violence.  The use of excessive force tends to cause costly physical injuries that are highly salient to insurers.

A resource that is putting a private sector spin quietly demanding reform to police departments across the country that isn’t getting enough attention is the insurance industry.  Many cities take out policies, either off the private market or by pooling with other cities, to cover any damages that may result from lawsuits accusing police officers of excessive force or other misconduct.  It’s been found that insurance companies are demanding, amongst other things, better training, better use of force policies, sexual harassment, outside reviews of all internal-affairs investigations, better screening in the hiring process, and even the firing of bad cops to data-driven insights gleaned from the insurer’s work with other municipalities.  Cities that comply get lower premiums, lower deductibles, and other incentives.  Cities that don’t may lose coverage altogether.  Financial incentives insurers can offer to cities and towns for good policing are powerful.  Not only are many municipal insurers already requiring better policies and training, the government entities that regulate these insurance companies could bring even more positive change.  Insurance companies influence is primarily felt in small and midsize cities because major cities have large enough tax bases and budgets to absorb high damages from lawsuits but that is slowly changing in larger cities.

When a department has been sued numerous times and does not take steps to reduce future liabilities, a risk pool or private insurer may arise premiums so precipitously or withdraw coverage altogether, such that the jurisdictions has to find alternative liability insurance or close down the department.  Examples of departments that lost coverage and were forced to disband their departments are; Point Marion Police Department after settling two lawsuits, Sorrento Police Department in Louisiana due to an excessive number of claims, Lincoln heights in Ohio lost coverage due to the insurance company raising its premium to over ten percent of the department’s budget and required the village to create a retention fund per incident.  That decision was based on a series of lawsuits stemming from wage disputes, employment harassment, wrongful termination, wrongful arrest and violations of civil rights.  Maywood Police Department lost its coverage because it posed too high a risk with an excessive number of claims filed and the city’s failure to hire a permanent city manager.  In recent years, cities in Illinois, Pennsylvania, Ohio, Tennessee, Louisiana, and elsewhere in California have had to disband their police departments after losing coverage.  When a department loses its coverage and has to disband, the cities are generally not left without law enforcement protections; instead the city or town contracts with a neighboring department, regional department, or county sheriff to fill the void.

Legislation in other cities across the country has been introduced which would require individual officers to carry liability coverage for lawsuits alleging excessive force, abuse or other misconduct.  The bills would require local governments to pay for the individual policies, but officers would pay any premium increases arising from their misconduct.  Doing this would force an officer to either change their behavior or leave the field of law enforcement.  Currently, most police officers rely on municipalities to cover legal costs and payout victims, either from public funds or blanket insurance, which provides no incentive for officers to check their behavior, often leaving the tax payers still on the hook.  But don’t get too excited about attempting to make these changes where the citizens are off the hook completely when it comes to their pockets because even making officers cover the cost of insurance, municipalities still find a way to charge its citizens to cover these cost ultimately still not holding officers accountable, which brings up very serious concerns about moral hazard and potential danger areas where an insurance company’s bottom line might come into conflict with the public good.

Specifically for Wisconsin an insurance company called Cities and Villages Mutual Insurance Company holds accounts for over fifty municipalities some of which we know very well like Kenosha, Wauwatosa, Racine, West Allis and many others that have been present during protests.  “Cities and Villages Insurance Company was established to provide liability insurance and risk management services to Wisconsin cities and villages ranging in population from 2,500 to over 100,000 in 1987.  Wisconsin municipalities are granted specific authority under Wisconsin law to organize municipal mutual insurance companies from a statute enacted in 1977 by the State Legislature in response to major premium increases by commercial liability carriers.  These communities adopted insurance strategies to achieve budget stability, insurance rate predictability, stable premiums and a constant high level of insurance protection”.  While nearly all insurance regulation occurs at the state level utilizing the insurance companies to enact reform starts at the local level.

No matter which way you look at it, every citizen pays for police misconduct.  When does it stop being a resident’s problem and start being a police problem?


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