US law enforcement liability market: Amwins emphasises tech, collaboration

Police departments around the country now operate in a perpetually escalating environment of scrutiny. They face increased pressure to rethink traditional policing tactics from activists, citizens, community leaders — and now their insurers. 

Cities across the U.S. spent more than $3bn to settle police misconduct lawsuits between 2010 and 2019. Given the gaps in publicly accessible data, the actual total is probably even higher, according to the Marshall Project.

Feeling the impact of increased loss severity trends and compressed payout patterns, insurers are revisiting their law enforcement liability coverage pricing structures to ensure they remain viable risk transfer partners over the long term. As a result, many municipalities are struggling to secure both adequate and affordable policy terms from a shrinking pool of available marketplace participants.

But there’s hope. Law enforcement officials are now more likely to engage with municipal risk management staff to implement robust training processes and safety procedures. At the same time, insurers and brokers are taking a more active role in helping public entities manage loss.

When underwriters collaborate and engage with the full array of stakeholders they insure — police chiefs, sheriffs, legal counsels, municipal risk managers, city administrators — they can have a positive impact on policy terms, community relations and general public safety.

The coverage market for law enforcement continues to tighten

Political and media polarization have heightened the awareness of and emotional sensitivity toward police misconduct allegations. Against this backdrop, juries are increasingly likely to be both angered by defendants and sympathetic toward plaintiffs in law enforcement liability claims. Growing court awards and settlements reflect this combination of factors.

Unlike other public entity liability claims, police misconduct cases are less likely to be subject to state-specific tort cap considerations because many are constitutional rights violations and are adjudicated at the federal level. This subjects law enforcement liability underwriters to a more volatile pattern of payouts, raising concern about loss potentials.

In response, many public entity insurers are hesitant to provide coverage for police departments. This hesitation leads them to raise rates, contract per occurrence limits and impose aggregates — or stop writing police liability coverage entirely. Even insurance pools have been exposed to aggregate limits by their supporting reinsurers and shared layer limits, a departure from past norms.

Consequently, standalone law enforcement liability markets have experienced increased submission activity from police departments forced to find alternatives. But leaning on these siloed markets is less than ideal because it leads to potential coverage gaps and gray areas, requiring brokers to meticulously coordinate coverage to ensure continuity between the law enforcement liability policy and public entity liability policies covering auto, sexual molestation and employment practice liabilities.

For example, standalone law enforcement policies may exclude auto liability claims, leaving coverage of police vehicles to the public entity liability insurer — which may decline to pay what it views as a law enforcement claim. On the flipside, public entity liability policies may exclude law enforcement entirely, leaving police departments without coverage for premises and sexual molestation liabilities.

Amid the current market turmoil, public entity underwriters are beginning to take a more active approach to engaging with law enforcement stakeholders. And the outlook is surprisingly optimistic.

Insurers take a proactive role preventing loss

Departments with comprehensive, current and credentialed de-escalation policies in place see a shift in culture toward risk management and accountability. The result is reduced exposure to high loss severities — giving insurers leverage to pressure police chiefs, municipal leaders and legal counsels to further prioritize risk reduction tactics.

In the past, insurers wrote policies based on information self-reported by police departments and validated by third-party credentialing agencies. But now more insurers are adopting a “trust and verify” approach, collaborating closely and engaging in direct dialogue with municipal and law enforcement stakeholders to ensure proactive risk management strategies are carried out. To this end, data and analytics can play a key role in helping both insurers and insureds predict loss propensity and potentially prevent loss before it occurs.

Of the more than $3bn paid to settle police misconduct lawsuits, half — over $1.5bn — was tied to officers whose actions resulted in multiple payouts. Identifying and retraining or removing the relatively small number of officers most likely to affect an adverse event can have a significant impact on both mitigating loss severity and increasing public safety and trust.

Given recent advancements in AI capabilities and increasing use of officer body cameras, it’s now possible to analyze the audio of recorded footage for predictive indicators of misconduct.

This proactive approach enables leaders to reassign offending officers’ duties or discipline them before their behavior escalates into more severe incidents. Other predictive analytics solutions analyze police incident report data to identify officers with a propensity for liability-inducing behaviors. The data suggests less than 5% of officers are responsible for 66% of adverse policing incidents, so preemptively identifying and removing them can have a significant impact.

Applications for this type of data analytics also extends to legal proceedings. Pools and insurers have clear stakes in the outcome of liability trials, and both are taking an active interest. Now that legal documents and proceedings are largely digitized, it’s possible to analyze summons and motions activity to identify outcomes associated with particular defense counsels, mediators and judges.

Public entity liability pools typically have a panel of defense counsels that they use, but those counsels were historically unlikely to collaborate. However, some insurers and pools have begun mandating that defense panel members collaborate and learn from one another to adopt the strategies and best practices most likely to limit loss. Even old playbooks of not admitting fault are being rethought in favor of a more empathetic engagement that incorporates commitments for reform and accountability.

Insurers play a central role in curbing law enforcement liability

Amid hard market conditions, insurers have a unique opportunity to influence police departments and other stakeholders to embrace technology solutions that can enhance both risk prediction and management.

In taking a “trust and verify” approach, underwriters are engaging more directly with the people they insure, fostering a collaborative environment where everyone is aligned in adopting strategies that limit risk to police officers and the public they serve.