2.4. ERMUSR 05-10-2016 - Laserfiche WebLink

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The reason LMCIT provides this coverage is because it recognizes that defending an OML charge can cost a city official a lot of money, that many OML violations are inadvertent and some may even occur on an attorney's advice, and that it's easy to make an accusation of an OML violation which can then force a city official to expend significant sums on defense regardless of the merits of the allegation. Defense costs are often the most significant financial consequence of OML Minn.Stat.§13D.06. lawsuits. The statutory penalty of$300 might be relatively minor,but defense costs can easily run to thousands of dollars. And those costs are incurred whether or not the official is ultimately found to have violated the law. Sometimes, too,the threat of litigation could be used as a tactic to intimidate or coerce councilmembers in some cases. LMCIT assumes that most councilmembers try in good faith to comply with the law,but sometimes even best faith efforts are not enough to head off an OML lawsuit. One might ask why public funds should be used to pay for someone who actually violated the OML and whether that encourages city officials to violate the law. The law clearly defines penalties for violating the law. A Minn.Stat.§13D.06violation carries a$300 civil penalty; potential loss of office for repeated violations; and possibly an order to pay the plaintiff's attorneys' fees if the court finds the individual intended to violate the law. If a city official has to pay the defense costs, the real monetary penalty to the individual can be many times greater than the penalty the legislature provides in the statute. The amount of defense costs may not have much relation to how serious the violation was. See Section II.C.1,Liability Regarding the city bankruptcy exposure, claims which arise from or relate to a not covered. city bankruptcy is excluded from the LMCIT liability coverage. The goal of this is that in the unlikely event that a city declared bankruptcy,the exclusion would avoid a situation where the city's creditors could turn the city's LMCIT liability coverage into an additional asset in the bankruptcy by using this kind of backdoor approach. At the same time, though, LMCIT wants to make sure individual city officials have some protection in these circumstances. Therefore,the defense cost reimbursement coverage provides defense costs to city officials for these types of claims. It's important to note,however,that coverage is excluded for independent contractors' activities related to a city bankruptcy and that are representing the city as a member of a committee,board, or commission. 89