Raising the Roof

Colorado Governmental Immunity Cap Increase Imminent

This year could bring the first increase in the tort cap in 4 years. It’s time to make sure your limits are high enough.

Four years ago, Governor John Hickenlooper signed Senate Bill 13-023, amending the Colorado Governmental Immunity Act (CGIA) to raise the cap on damages recoverable against public entities from $150,000 to $350,000 per claimant, and from $600,000 to $990,000 per occurrence to all claimants.

This came at the heels of the Lower North Fork wildfire, an event in which a local government was found negligent. Since it came into effect on July 1, 2013, citizens can bring a wide range of claims against public entities that override governmental immunity, like negligent operations of public facilities, unsafe conditions of parks and roads, or failure to perform a background check as required of education employment.1

So, how is this relevant to us now?

What you may not know is that Subsection (c) of Section 1 of the bill also states the following:

“The amounts specified in subsections (a) and (b) of this subsection (1) shall be adjusted by an amount reflecting the percentage change over a four-year period in the United States index for Denver-Boulder-Greeley, all items, all urban consumers, or its successor index. On or before January 1, 2018, and by January 1 of every fourth year thereafter, the Secretary of State shall calculate the immediately preceding four-year period as of the date of the calculation. The adjusted amount shall be rounded upward to the nearest one thousand dollar amount increment.”

The bill refers to the United States index, or more specifically the Consumer Price Index (CPI), which is set by the United States Department of Labor’s Bureau of Labor Statistics. The CPI represents the prices of goods such as food staples (milk, wheat, coffee, wine, chicken, etc.), transportation, recreation (televisions, pets, admissions to events, etc.), health service charges, fuel, rent or housing costs of a primary residence, bedroom furniture, clothing (even including jewelry) and other essential items. These prices rise with inflation and market fluctuations, allowing this benchmark to more accurately reflect the actual cost of goods and services in one geographic area to another. For example, the aforementioned things don’t cost the same thing in Denver as they would in Grand Junction, nor would they in San Francisco or Kansas City.

Many public entities refer to the CPI for their individual budgetary projections because it ties so closely to tax rates.2 Using the years 1982–1984 as a reference date, percentage increases and decreases are applied to a baseline CPI of 100. That means a CPI of 116.5 shows a price increase of 16.5%. Roughly translated into dollar amounts, prices for goods and services had risen from $10 in 1982–1984 to a hypothetical $11.65.

When this bill first came into effect four years ago, the Denver-Boulder-Greeley CPI for all urban consumers was 230.79. As of the first half of 2017, the CPI was recorded at 252.76.3 This may not seem like much of a difference at first glance, but the maximum amount that public entities would have to pay if found liable for negligence would be adjusted to reflect this percentage increase in CPI from 2013 to 2017. This could mean a severe financial blow to public entities that have not factored in the changes to the cap when considering the limit adequacy of their liability coverage.

Last year, the CSD Pool increased the base limit of liability under the Public Entity Liability coverage to $2 million. We made this change at no cost, and while it does help reduce the severity of some of the threats posed by increases in the CGIA, it won’t completely protect most districts from catastrophic claims, especially any that happen to be violations of federal law.

Note that during this change, members already carrying Excess Liability limits saw their total limits of liability increase by $1 million. The maximum total limits available remain at $10 million. If you would like to take a look at purchasing higher limits, contact us at csdpool@mcgriff.com.

Note that when the firm numbers on the new CGIA limit are finalized, we will provide an update.

  1. http://www.colorado-law.net/colorado-increases-caps-on-damages-recoverable-under-the-colorado-governmental-immunity-act
  2. https://www.colorado.gov/pacific/dola/inflation-denver-boulder-greeley-consumer-price-index
  3. https://www.bls.gov/regions/mountain-plains/news-release/consumerpriceindex_denver.htm
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