Special Events and Use of Facilities Exposure

The responsibility to respond to our members' coverage questions and provide coverage interpretation primary falls on OMAG’s Underwriting and Member Services Departments with support provided by OMAG’s Legal and Risk Management Departments. Providing a clear and consistent response to these inquiries is always our goal.

Our members occasionally ask “Are we covered for special events that take place in our municipalities? What if someone is injured in our park or one of our buildings when these special events take place? What if we lease our park or a building to a private group? 

OMAG has prepared a loss bulletin to assist our municipalities in identifying the various areas of liability created under these circumstances and to provide suggested ways to avoid the risk entirely or to shift the risk primarily to more appropriate persons or entities. Please take a moment to review the loss bulletin attached and share it with your municipal administrator and board.

Special Events and Use of Facilities Exposure Loss Bulletin                                                         

OMAG frequently receives inquiries from its member cities and towns (“municipalities”) concerning liability for special events.   Questions arise regarding city/town liability to someone injured while on the premises of municipal facilities, such as parks, auditoriums, or fairgrounds. Is a municipality’s liability any different when the municipal facilities are leased to third parties for special events such as firework displays, arts, and crafts festivals, rodeos or carnivals?  The purpose of this bulletin is to assist member municipalities in identifying the various areas of liability created under these circumstances and to provide suggested ways to avoid the risk entirely or to shift the primary risk to more appropriate persons or entities.

Hold Harmless Agreements and Certificates of Insurance

Many municipalities require every group that exclusively uses a public facility, to provide a Certificate of Insurance and Hold Harmless Agreement as a method of protecting the municipality from future claims or lawsuits.  In the event the group has an insurance policy, the city or town should require that it be named as an “Additional Insured” under the Certificate of Insurance.

The purpose of requiring the Certificate of Insurance is to make certain that the group has the financial means available to compensate an injured person.  Naming the municipality as an additional insured gives the municipality the ability to seek coverage under the policy should the primary insured fail to do so.  If the injured person can recover for his injuries from the group through the separate insurance policy, the injured person is less likely to look to the municipality for compensation.  Conversely, if the group has no means of compensating the injured person through its own insurance policy or otherwise, then the injured person will likely look to the municipality for the payment of its costs and expenses arising from their participation in the event.

A Hold Harmless Agreement executed by a group alone, while helpful, may prove to be of little value if the group has no financial resources to pay for defense costs or a judgment.    For this reason, it is important that the group also provide a Certificate of Insurance demonstrating its ability to defend and pay for any injuries.  OMAG can provide sample language of a Hold Harmless Agreement on request. (See the publication - Hold Harmless Agreements and Certificates of Insurance).

Lease of Municipal Facilities

The municipality may be asked to lease its facilities to a private group so that it can hold its own activities such as a rodeo, stock car race, or a baseball tournament.  What duty of care is owed to the participants of these special events?  Does it matter whether the private group is for-profit, not-for-profit, incorporated or non-incorporated?  

If the municipality’s participation is limited to leasing or provided the location owned by the municipality, then absent a defective condition in the leased premises existing at the time of the lease and knowledge of that defect by the municipality, the municipality acting as a lessor of the premises is not liable for injuries to third parties.  

A municipality can limit its liability exposure by leasing its municipal facilities to private groups when the municipality gives up its control over the premises.  The only liability exposure would come from the municipality’s knowledge of a dangerous condition which it failed to make known to the lessee.

The legal status of the private group that leases the facilities from the municipality, whether it be a not-for-profit group, a corporation or association, makes no difference and is irrelevant when it comes to the issue of liability.  Liability will attach to a municipality if its negligence can be shown to have directly caused injuries to another.  It is important that a municipality adequately insulate itself from liability by using the methods discussed herein.

City and Town-Sponsored Special Events

If a person is injured at a special event which the city or town-sponsored, they will be looking for someone to pay for related costs and expenses arising from their participation in the event.  Will the city or town, or the local service club which promoted the special event be liable or legally responsible for the person’s injuries?  There is no clear answer.  The facts of each situation are going to determine who is liable.  Whether the city or town is liable will depend upon various factors such as:  did the municipality exercise control over the event; did municipality support the event with public funds or in-kind services by volunteering its employees; did the municipality own, maintain or operate any of the equipment or amusement devices.  

Due to the inability of service clubs or organizations to get liability insurance coverage today, many municipalities are being asked to take over the special events so that the municipalities’ insurance coverage will be available to pay for any injuries which may occur during the event.  In particular, some municipalities have been asked to take over the set-up and discharge of fireworks or the operation of carnival rides.  Most municipalities probably have no experience whatsoever in assuming these duties, their associated risks, or safety requirements.  Asserting that a municipality only agreed to sponsor a special event is no defense to a damage suit where it can be shown that the municipality was negligent in its involvement.  OMAG recommends that member municipalities not accept this added exposure to sponsor special events due to the extraordinary nature of the risk involved.

Summary

There are several ways in which to protect your municipality from liability when groups or organizations want to use your public facilities.  It is suggested that Hold Harmless Agreements and Certificates of Insurance be required of such organizations.  Another way to protect the municipality is to lease the premises to the group for its intended purpose and then step away from further involvement with the event.

It is certainly not recommended that municipalities volunteer to sponsor or operate special events in an effort to lend its liability coverage to private organizations that previously sponsored, operated or held special events.  Often times, the municipal employees are inadequately trained or experienced to take on additional responsibilities.  Then, if people are injured, the inadequate training of employees may itself be argued to be a violation of a duty of care owed to the injured parties.

Special Events and Use of Facilities Exposure revised by OMAG Associate Counsel.  The information in this bulletin is intended solely for general informational purposes and should not be construed as or used as a substitute for legal advice or legal opinions with respect to specific situations since such advice requires an evaluation of precise factual circumstances by an attorney. OMAG does not represent or endorse any group, site or product that may be mentioned in this article.                                                                                                                   

March 2020

Managing Alcohol Sales at Municipal Golf Courses, Country Clubs, or Marinas

This Loss Bulletin is intended to help municipalities reduce their risk of civil liability in connection with offering alcoholic beverages at Municipal Golf courses, Country Club or Marinas.  Understanding current case law and the changes in state regulation of alcoholic beverage sales and acting accordingly should greatly reduce the risk to cities and towns.

On November 8, 2016 the voters of the State of Oklahoma approved a State Question 792 that modified the regulation of alcohol sales throughout the state.  The law was not effective until October 1, 2018 to allow time for transition.  For the most part Article 28 of the Oklahoma Constitution was repealed and Article 28A was put in its place to govern Alcoholic Beverage Laws and Enforcement.  Under the prior regulations, beer or beverages containing 3.2% or less alcohol by volume were not considered to be alcoholic beverages.  Under the new regulations “alcoholic beverages” are defined as “All beverages that contain alcohol, unless otherwise defined by law, shall be considered alcoholic beverages by this state and therefore governed by this Article and all other applicable laws.”[1]

How does this change affect cities and towns across the state?  While municipal golf courses, Country Clubs, or Marinas in the past have been licensed by a county or a city to sell non-alcoholic beverages (3.2% or lower in alcohol by volume) several have asked how the new law might impact beer sales with a greater volume of alcohol in those beverages. 

Implementing statutes to this Constitutional provision can be found in Title 37  and 37A Okla. Stat. Section 1-101 et seq.  During its second session, the 55th Oklahoma Legislature enacted substantial amendments to Title 37 (Intoxicating Liquors) of the Oklahoma Statutes and added a new Title 37A (Alcoholic Beverages). The enactments from the 2016 Session affected over 400 sections in the Oklahoma Statutes relating to alcoholic beverages, including about 370 sections in Titles 37 and 37A.  Most of these amendments from the 2016 Session were effective on October 1, 2018.[2]

During the 2019 legislative session additional clarifications to the law were made by the passage of Senate Bill 728 which passed with an emergency clause becoming effective upon its signing by the Governor on April 10, 2019.  Among other things, SB 728 provided that an alcohol beverage “licensee may sell beer and wine for off-premises consumption if it meets the classification of a golf course, country club, or marina” [3]

First, it is important to know that cities, as political subdivisions of the State, are prohibited from the retail distribution of alcoholic beverages. [4]  If cities and towns are determined to serve alcoholic beverages at golf courses and other qualifying recreational facilities, then one approach is to consider contracting with an independent contractor to provide that service.  An independent contractor would need to apply with the ABLE Commission for the appropriate license(s) to sell both on premises and off premises if the desire is to sell beer that can then be consumed on the golf course.  The licensing process is somewhat detailed and can be accessed on the ABLE website.[5] Some of the advantages of using an independent contractor to provide wine and beer on the public golf course or another qualifying recreational facility are:  1) requires the independent contractor to navigate the applicable ABLE regulations; 2) requires the independent contractor to properly train and supervise their own employees to ensure proper handling of risks associated with serving alcoholic beverages to patrons[6]; 3) minimizes a town or city’s investment needed to provide this amenity for its patrons.  

Another option for a city or town that would like to serve alcoholic beverages at a city golf course or qualifying recreational facility may be to utilize a public trust of which the city or town is a beneficiary.  A public trust is a separate legal entity than a city or town and thus would not fall within the prohibition of selling alcoholic beverages that applies to a city as a political subdivision.  The license from the ABLE Commission could be held by a Public Works Authority, a Municipal Authority, or other public trust organized under the Oklahoma Public Trust Act. [7]  The licensing process through the ABLE Commission would need to be followed. (see footnote #5).  The land or property upon which the alcoholic beverage dispensing would occur would need to be under ownership, lease or control by the Public Trust and all Trustees of the Public Trust will need to execute the appropriate background investigation documents.  In addition, for OMAG member towns and cities who carry General Liability or Property Damage Policies, under Section VI, Exclusion 14 there is no coverage under those policies for serving or furnishing alcoholic beverages for a charge.[8] 

Should a City or town desire to extend coverage to its public trust that would be involved in the sale of alcoholic beverages at our municipal golf courses or other qualifying recreational facilities, then a special rider or waiver of this exemption would need to be considered.[9] Please contact OMAG if you need additional information or guidance.  The information provided in this bulletin is not intended to be legal advice.  Specific facts and circumstances unique to your town or city should be discussed with your City Attorney for legal guidance. 

[1]Okla. Const. Article 28A, Section 1

 [2] OSCN has prepared a table that lists all sections in Titles 37 and 37A affected by the 2016 enactments. This table shows the disposition of all affected sections in Title 37 (amendments, repeals, and renumberings), and it shows the source of all sections added to the new Title 37A. This table should help OSCN users to determine which sections in Titles 37 and 37A have been affected. OSCN Dispositional Table – 2016 Acts Affecting Titles 37 and 37A   (PDF, 21 pages)

 [3] Golf course, Country Club or marina pursuant to the most recently adopted North American Industry Classification System (NAICS). 37A Okla. Stat, sections 2-110 (2), 2-128(2).

 [4] Okla. Const Art. 28A § 8. State and other governing entities prohibited from engaging in alcoholic beverage business

The State of Oklahoma, or any political subdivision thereof, or any board, commission or agency thereof, is hereby prohibited from engaging in any phase of the alcoholic beverage business, including the manufacture, sale, transportation or distribution thereof, at wholesale or retail, and the maintenance, ownership or operation of warehouses or alcoholic beverage stores; except that if the voters of a county in which a state lodge is located approve retail sale of alcoholic beverages by the individual drink for on-premise consumption, and if the State Legislature enacts legislation approving such sales in any such lodges located in any such counties, then such sales are authorized. The Legislature may enact laws restricting the involvement of officers and employees of the state and political subdivisions thereof in the alcoholic beverage business.

Provided, that nothing herein shall prohibit the sale of alcoholic beverages legally confiscated as provided by law.

 [5] https://www.ok.gov/able/documents/ABLE%20Form-Beer%20%20Wine%20Application.pdf

 [6] Brigance v. Velvet Dove Restaurant, Inc. 1986 OK 41, 725 P.2d 300 “At common law a tavern owner who furnishes alcoholic beverages to another is not civilly liable for a third person's injuries that are caused by the acts of an intoxicated patron. Such rule is principally based upon concepts of causation that, as a matter of law, it is not the sale of liquor by the tavern owner, but the voluntary consumption by the intoxicated person, which is the proximate cause of resulting injuries, so that the tavern owner is therefore not liable for negligence in selling the liquor.” @301 “We hold today that public policy is better served by holding that the common law principles of negligence are applicable where a commercial vendor for on the premises consumption is shown to have sold or furnished intoxicating beverages to a person who was noticeably intoxicated from which a jury could determine that such conduct creates an unreasonable risk of harm to others who may be injured by the person's impaired ability to operate a motor vehicle. Based upon compelling reasons we, thus, reject the common law doctrine of tavern owner nonliability in Oklahoma.” @305-306.  Oklahoma Courts, since Brigance, have declined to extend the common law modification beyond the factual circumstances of that case, i.e. an innocent third party injured as the proximate cause of the negligence of the commercial server who knew or should have known by their observation that the person being served was too intoxicated to safely operate a motor vehicle. See BATTLES v.  COUGH, 1997 OK CIV APP 62, 947 P.2d 600, Wrongful death action was brought against alleged social host and restaurant for serving alcoholic beverages to motorcyclist subsequently involved in collision that killed passenger. The Court of Civil Appeals, held that the alleged social host was not liable for serving alcoholic beverages to motorcyclist under the facts of that case including there is no duty on vendor to deny service of alcoholic beverages to persons who will or might become intoxicated thereby; evidence that motorcyclist drank three beers and two mixed drinks in one hour and five minutes did not permit inference that restaurant served him alcohol when he was noticeably intoxicated; evidence of loud talking in restaurant by member of group that included motorcyclist also did not permit such an inference.  See OHIO CASUALTY INSURANCE COMPANY v. Todd's Tavern et al., 1991 OK  54, 813 P.2d 508.  Question was certified from Federal District Court regarding possible cause of action intoxicated driver had against tavern owner. The Supreme Court held that tavern owner has no liability to intoxicated adult who voluntarily consumes alcoholic beverages to excess and sustains injury as result of his intoxication.  See TEEL v. WARREN, III, et al., 2001 OK CIV APP 46, 22 P.3d 234. Guest brought action against fraternity for personal injuries he allegedly sustained when he was assaulted by fraternity member while attending a party at the fraternity house. The Court of Appeals held that any action by fraternity which violated statute barring the furnishing of alcohol to a person under the age of 21 could not be proximate cause of injuries suffered by guest at fraternity house when 19-year-old fraternity member became intoxicated and assaulted him; fraternity was not commercial seller of alcoholic beverages, but a social host. 37 Okl.St.Ann. § 537; See also SMITH v. TEEL, et al, 2008 OK CIV APP 7, 175 P.3d 960.  Spouse of car passenger killed in collision with vehicle driven by intoxicated patron of restaurant and dance club brought wrongful death action against restaurant, which was a limited liability company, and two of its alleged managers and owners.  The Court of Civil Appeals held that alleged managers and owners could not be personally liable for death of passenger.

 [7] See Oklahoma Public Trust Statutes - Title 60 Okla. Stat. Section 176 et seq

 [8] OMAG MPPP & MLPP Policies – “VI. EXCLUSIONS. We have no obligation to pay nor do we have any obligation to defend any claim against a plan member on account of:  . . . 14. Loss for which any plan member, if serving or furnishing alcoholic beverages for a charge, may be held liable by reason of:   a. causing or contributing to the intoxication of any person; or  b. the furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol.”

 [9] Thirty-five OMAG members cities have been identified as having properties described as golf courses in the MPPP. Those members in the MPPP using that criteria are: Altus, Ardmore, Blackwell, Boise City, Buffalo, Cedar Valley, Clinton, Edmond, Enid, Fairview, Guymon, Hobart, Hooker, Kingfisher, Lindsay, Medford, Midwest City, Okeene, Owasso, Pawnee, Ponca City, Prague, Pryor Creek, Purcell, Sand Springs, Sapulpa, Sayre, Seminole, Shattuck, Stroud, Tahlequah, Walters, Watonga, Wewoka and Woodward.  In addition, any city or town that OMAG provides general liability coverage (MLPP) to that are not afforded property coverage by OMAG has the same exclusions contained in that policy. That portion of the reported expenditures on the forms provided by our members to the State Auditor report expenditures for Culture & Recreation could include expenditures for parks, playgrounds, golf courses, swimming pools, museums, marinas, community music, Drama, celebrations, and zoos.  So, some additional effort would be needed to poll other cities to see if they are anticipating selling alcoholic beverages at golf courses or other qualifying recreational facilities.

2019 Municipal Budget Act Checklist

MUNICIPAL BUDGET ACT ANNUAL CHECKLIST 

IMPORTANT DEADLINES

•  Before June 1st – Budget Prepared by CEO & Presented to the Governing Body [11 O.S. §17-205]

•  Before June 16th – Public Hearing [11 O.S. § 17-208]

• Publish Notice of Date, Time, & Place of the Hearing and the Budget Summary at Least 5 Days Before the Public Hearing [11 O.S. §17-208]

• Published on the Municipal Website & in a Newspaper of General Circulation [11 O.S. §17-208]

• Copies of the Budget Available with the Municipal Clerk [11 O.S. §17-208]

• Before June 24th – Adopt the Budget by Resolution [11 O.S. §17-209(A)]

• July 1st – Beginning of the Fiscal Year

• July 30th – Adopted Budget Transmitted to the State Auditor [11 O.S. §17-209(B)]

 BUDGET BY FUNDS & DEPARTMENTS

• Does Not Apply to Budgeting by Purpose [11 O.S. §17-217-218]

• Includes a Budget Summary [11 O.S. §17-206(B)(1)]

• Includes a Budget Message – Explains the Budget and its Important Features [11 O.S. §17-206(B)(2)]

• Tabular Form for Each Fund, Itemized by Department & Account Showing:

• Actual Revenues & Expenditures for the Immediate Prior Fiscal Year [11 O.S. §17-206(B)(4)(a)]

• Revenues & Expenditures for the Current Fiscal Year as Adopted or Amended [11 O.S. §17-206(B)(4)(b)]

• Estimates of Revenues & Expenditures for the Budget Year [11 O.S. §17-206(B)(4)(c)]

 IMPORTANT REQUIREMENTS OF THE BUDGET

• Resolution That the Governing Body Elects to Come Under the Provisions of the Municipal Budget Act [11 O.S. §17-203]

• Budgeted Expenditures Cannot Exceed the Estimated Revenues [11 O.S. §17-206(C) & 11 O.S. §17-209(A)]

• No More Than 10% of any Fund can be Budgeted for Miscellaneous Expenses [11 O.S. §17-206(C)]

• Expenditures Cannot Exceed 90% of Appropriations for Any Fund Until Actual Revenues Equal to Estimate are Received [11 O.S. §17-211(B)(2)]

• Determine Needs of the Municipality for Sinking Fund Purposes & Include Those Requirements in the Debt Service Fund Budget [11 O.S. §17-207]

• File the Estimate of Needs with the County Excise Board (11 O.S. §17-209(B))

• Budget Shall Present a Complete Financial Plan (Past & Anticipated Revenues & Expenditures) [11 O.S. §17-206(A)]

 FISCAL YEAR REVIEW

• Submit All Contracts That Require Annual Approval

• Submit Annual Contract Renewals for Approval

• Determine if Sales Tax Pledges Need to be Renewed or Appropriated

 BUDGET AMENDMENTS/TRANSFER OF FUNDS

• CEO as Authorized by the Governing Body May Transfer Unexpected/Unencumbered Appropriations from One Department to Another Within the Same Fund (so Long as no Appropriation for Debt Service or Other Appropriation Required by Law or Ordinance is Reduced by Minimums Required) [11 O.S. §17-215(A)]

• Governing Body May Transfer Enterprise Funds to Another Fund [11 O.S. §17-215(B)]

• Governing Body May Transfer Funds When the Necessity for Maintaining a Fund Has Ceased [11 O.S. §17-215(C)]

• Budget Amendments Must be:

  • Adopted by the Governing Body [11 O.S. §17-216(A)]

  • Filed with the Municipal Clerk & the State Auditor [11 O.S. §17-216(C)]

  • Used for Revenues Received or Not to be Received [11 O.S. §17-216(B)]

  • Used for Unexpended or Unencumbered Fund Balances at the End of the Fiscal Year [11 O.S. §17-216(B)]

  • Used if Insufficient Revenues or Emergency Expenditures to Transfer Funds [11 O.S. §17-216(B)]

  • Also Used to Reduce Appropriations [11 O.S. §17-216(B)]

 CONSTITUTIONAL PROVISIONS

• Ensure Taxes Are Being Levied & Collected for Public Purposes Only [Art. X, Okla Const. §14]

• Ensure Taxes Levied & Collected for One Purpose Are Not Devoted to Another Purpose [Art. X, Okla Const., §19]

• Ensure No Appropriations for any Corporation, Association or Individual (No Appropriations for Private Enterprises) [Art. X, Okla Const. §17]

• Ensure Not Pledging or Loaning its Credit to Any Individual, Corporation, or Association [Art. X, Okla Const. §15]

 REMINDERS

• Taxpayer May File Protest Against the Levy of Ad Valorem Taxes Within 15 Days  [11 O.S. §17-210]

• If No Protest is Filed, the Budget & Any Appropriations Thereof Are Legal & Final Unless Amended by the Governing Body [11 O.S. §17-210]

• Expenditures Incurred, Made, or Authorized Which Exceeds the Fund Balance [11 O.S. §17-211(C)]:

  • Becomes the Obligation of the Officer or Employee

  • Is Not Enforceable Against the Municipality

  • Forfeits Their Office

  • Subject to Civil & Criminal Penalties

  • Expenditure is Void

  • Budget as Appropriated Constitutes an Appropriation for Each Fund [11 O.S. §17-209(C)]

Accidents Involving Municipal Vehicles - Do Your Employees Know the Proper Actions to Take?

How does your municipality handle a vehicular accident when one of your employees is involved and operating a municipal vehicle? Being prepared and knowing what to do if this happens BEFORE it happens is key to promoting a successful outcome.

Do you have your employee contact their department supervisor? Police Department?  OMAG would certainly suggest a police report be filed, no matter how minor the accident. 

Do they know how to contact an ambulance service if needed?

Do they provide the information on your insurance verification card to the investigating officer?

Have they been advised to make no statement regarding fault at the scene?

Do they know how to assist the other party with the proper method to file a claim with the city?

If appropriate, do they take photos of the accident scene and all vehicles involved?

Are they advised not to make suggestions or recommendations on repair facilities? Making suggestions or recommendations on repair facilities can present uncomfortable situations if that repair facility does not meet the needs of the third party.

These things are very important to be sure that the investigation can be handled correctly. Regardless of whether the city employee feels they are at fault, a thorough investigation should take place to determine liability.  

If you have questions about how to handle a situation like this, or if you need help developing a plan, please contact Underwriting Director Chris Webb at cwebb@omag.org or Member Services Director Kyle Waid at kwaid@omag.org.

Your OMAG Municipal Property Protection Plan (MPPP) - Coverage for Outdoor Property

As personnel in municipal offices change, replacing the knowledge and experience of the person that served your municipality can be difficult.  Understanding insurance coverage may not be a priority when so many other things demand your attention as a municipal employee. Please let the following serve to provide a description of the coverage for outdoor property that OMAG provides.  

Outdoor Property is sometimes referred to as property in the open and should be listed on your schedule of covered property described as such. Outdoor property does not provide coverage for buildings and is only for the named structures listed below.  

Outdoor Property means retaining walls not part of a building, lawns (including fairways, greens and tees), trees, shrubs, plants, bridges (excluding vehicular bridges), walks, roadways, patios or other paved surfaces, outdoor lighting fixtures (excluding holiday and seasonal lighting), traffic signaling devices or controls, utility poles (including transformers on the poles but not including the transmission lines), or emergency communications radio towers or sirens, and fire hydrants.

Outdoor property is covered for loss or damage only by the following Covered Causes of Loss: Wind, Fire, Lightning, Explosion, Riot or Civil Commotion, Vandalism or Malicious Mischief, or Aircraft or Vehicles. This coverage also applies to the necessary and reasonable expense incurred by the plan member to remove debris of outdoor property at the plan member’s premises caused by or resulting from a covered cause of loss that occurs during the policy period. Such expenses will be paid only if reported to OMAG in writing within 180 days of the date of direct physical loss or damage. This will not increase the limit of coverage that applies to Outdoor Property. 

It is important to understand each MPPP member is automatically provided $100,000 in coverage for outdoor property, including debris removal aggregate in any one plan year; however, trees, shrubs and plants are subject to a maximum of $5,000 per occurrence. Although this $100,000 in coverage is provided to all MPPP members you are responsible for providing timely and accurate lists of such properties so that any loss incurred over the provided limit is properly covered.  To assure adequate protection in the case of a loss, your property needs to be reviewed annually to ensure it is listed on your schedules at replacement cost value.

Understanding Your OMAG Cyber Liability Coverage

As personnel in municipal offices change, replacing the knowledge and experience of the person that served your municipality can be difficult.  Understanding insurance coverage when so many other things seem to demand our attention may not be a priority. Please let the following serve to provide a basic description of the cyber liability coverage OMAG provides.  Please refer to your cyber liability and data breach response supplemental declarations page to review applicable limits. 

Information Security and Privacy Liability - Covers damages and claims expenses because of a claim for:

• theft, loss, or unauthorized disclosure of personally identifiable non-public information or third-party information that is in the care, custody, or control of the insured organization

• one or more of the following acts or incidents that directly result from a failure of computer security to prevent a security breach

  • the alteration, corruption, destruction, deletion, or damage to data stored on computer systems

  • the failure to prevent transmission of malicious code from computer systems to computer or network systems that are not owned, operated or controlled by an insured; or

  • the participation by the insured organization’s computer systems in a denial of service attack directed against a computer or network systems that are not owned, operated or controlled by an insured

• failure to timely disclose an incident described above in violation of any breach notice law
  failure to comply with that part of a privacy policy that specifically:

• prohibits or restricts the disclosure, sharing or selling of a person’s personally identifiable non-public information;

  • requires the insured organization to provide access to personally identifiable non-public information or to correct incomplete or inaccurate personally identifiable non-public information after a request is made by a person

  • mandates procedures and requirements to prevent the loss of personally identifiable non-public information

  • failure to administer (a) an identity theft prevention program or (b) an information disposal program required by regulations and guidelines

Privacy Breach Response Services - Provides privacy breach response services because of:

• theft, loss, or unauthorized disclosure of personally identifiable non-public information or third-party information that is in the care, custody, or control of the insured organization; or

• one or more of the following acts or incidents that directly result from a failure of computer security to prevent a security breach

  • the alteration, corruption, destruction, deletion, or damage to data stored on computer systems

  • the failure to prevent transmission of malicious code from computer systems to computer or network systems that are not owned, operated or controlled by an insured; or

  • the participation by the insured organization’s computer systems in a denial of service attack directed against a computer or network systems that are not owned, operated or controlled by an insured.

• Privacy breach response services include the following:
  forensic and legal assistance from a panel of experts to help determine the extent of the

• breach and the steps needed to comply with applicable laws

• notification to persons who must be notified under applicable law
  credit and identity monitoring services to affected individuals
  public relations and crisis management expenses

Regulatory Defense and Penalties - Covers claims expenses and penalties resulting from a claim in the form of a regulatory proceeding resulting from a violation of privacy law and caused by any of the following incidents:

• theft, loss, or unauthorized disclosure of personally identifiable non-public information or third-party information that is in the care, custody, or control of the insured organization

• one or more of the following acts or incidents that directly result from a failure of computer security to prevent a security breach

  • the alteration, corruption, destruction, deletion, or damage to data stored on computer systems

  • the failure to prevent transmission of malicious code from computer systems to computer or network systems that are not owned, operated or controlled by an insured; or

  • the participation by the insured organization’s computer systems in a denial of service attack directed against a computer or network systems that are not owned, operated or controlled by an insured

  • failure to timely disclose an incident described above in violation of any breach notice law

Website Media Content Liability - Covers damages and claims expenses for one or more of the following acts committed during the course of the insured organization’s display of media material on its website or on social media web pages created or maintained by or on behalf of the insured organization:

• Defamation, libel, slander, infliction of emotional distress, outrage, or other tort related to disparagement or harm to the reputation or character of any person or organization

• Violation of the rights of privacy of an individual

• Invasion or interference with an individual’s right of publicity

• Plagiarism, piracy, misappropriation of ideas

• Infringement of copyright, domain name, trademark, trade name, trade dress, logo etc

• Improper deep-linking or framing within electronic content

PCI Fines, Expenses and Costs - Indemnifies insured for PCI Fines, expenses and costs insured becomes legally obligated to pay because of a claim

Cyber Extortion - Indemnifies the insured for certain cyber extortion loss, subject to policy conditions, as a direct result of an extortion threat 

First Party Data Protection - Indemnifies the insured for certain data protection loss incurred as a direct result of: 

• Alteration, corruption, destruction, deletion, or damage to a data asset

• Inability to access a data asset that is directly caused by a failure of computer security to prevent a security breach

First Party Network Business Interruption - Indemnifies the insured for certain business interruption loss sustained during the period of restoration as a direct result of the actual and necessary interruption of computer systems caused directly by a failure of computer security to prevent a security breach

The descriptions contained in this communication are for informational purposes only. The exact coverage afforded by the product described herein is subject to and governed by the terms and conditions of each policy issued. 

MUNICIPAL WATER & WASTEWATER TREATMENT PLANT COVERAGE

Many of our Municipal Property Plan members own and operate their own Water and Wastewater Treatment Plants. Operating these plants can present challenges in providing routine plant maintenance, meeting growing population needs, staying in compliance with regulatory requirements and upgrading their outdated structures and equipment. Many have provided these upgrades and many more will soon need to do so. These upgrades can certainly impact values and leave your municipality exposed. Backup generators, upgraded or added pumps, electric control panels and SCADA systems are exposed to lightning and power outages. Buildings, fencing and lighting are exposed to hail and high winds and vandalism. 

 OMAG completed an appraisal project on all plants in 2020 through our partnership with a professional appraisal service. This was a five-year project targeted at appraising all of our members’ Water and Waste Water Treatment Plants. These professional appraisals were provided as a value-added service at no charge to members. Our purpose in performing these appraisals is to be certain that you are provided an accurate replacement value for these structures and equipment.

If you have any questions regarding your plants’ coverage or our professional appraisals of your plants, please contact Underwriting Director Chris Webb.   

What is a Bond, and Who Needs One?

What is a Bond: A bond is an obligation of the Surety (the company issuing the bond) to protect a person or entity (in this case your municipality or public entity) against financial loss caused by the acts of the principal (in this case your city official or employee).  

Municipal or Public Entity Positions to consider Bonding: There are essentially three types of municipal officials or employees serving the municipality or public entity:

First: the elected official who, although ultimately answerable in the political process for their performance, is a representative of those who have elected him or her and owes a duty to faithfully perform the functions assigned to them for the public good.

Second: public agents, or appointed officials, also share the responsibility of owing this special duty to their municipality or public entity. For the appointed official, the duty to faithfully perform emanates from the governmental powers reposed in the official. Power, authority and control would not exist absent the appointment to office.   

Third: the public employee, although serving for the public good, does not owe the same duty as the elected or appointed official. The public employee does not hold a special position of trust relative to the public, but instead owes a duty to his or her employer, in this case the municipality or public entity.

Bond Coverage vs. Your Municipal Liability Protection Plan (MLPP) Coverage:

Bonds serve a different purpose than coverage provided under your MLPP. Coverage under your MLPP protects the municipality or public entity from negligent acts of an elected or appointed official or public employee that could result in a third-party claim or suit. Bonds protect the municipality or public entity from a financial loss as a result of an improper or illegal act of an elected or appointed official or public employee.

What are the Types of Bonds Available:

There are numerous types of bonds available in the market. The most commonly used by a municipality or public entity are Fidelity Blanket Bonds, Fidelity Schedule Bonds, Public Official Individual Bonds, Public Official Schedule Bonds, and Public Official Blanket Bonds.

Fidelity Bonds: Statistics show a shocking increase in employee theft.  The only protections against this kind of loss are good internal control, regular outside audits and a Fidelity Bond. Fidelity Bonds are often referred to as “honesty insurance.” They cover loss due to any dishonest act of a bonded employee. The employee may steal alone or with others. The loss may be money, merchandise or any other property, real or personal. The Fidelity Bond is available in a group (blanket) or individual (schedule) form. These bonds are available in $5k, $10k, $25k, $50k, and $100k coverage amounts for periods of one and three years with the three-year bond provided at a reduced rate.

Public Official Bonds: For the public official entrusted with the handling of public funds, the primary purpose of the Public Official Bond is the protection of those funds from mismanagement and theft: Public Official Bonds guarantee taxpayers that the official will do what the law requires. A public official is expected to “faithfully perform” the duties of the office. Public Employee Bonds are also available for bonding the subordinates of the public official (those people who are not required by statute to be bonded). Those subordinates need to be bonded for dishonesty only.

Types of Public Employee Bonds and Coverages:

Individual Bond – Covers a single official for a specific amount.

Name Schedule Bond – Covers specific individuals for a stated amount in a schedule attached to the bond.

Position Schedule Bond – Covers specific positions for a stated amount in a schedule attached to the bond. 

Public Employee Blanket Bond – This bond covers all employees (except Treasurers, who are required to post individual qualifying public official bonds and cannot be covered by a blanket bond) unless specifically excluded.

Honesty Blanket Bond Coverage – Insures against loss sustained by the insured through any dishonest act committed by any of the employees. Recovery is limited to the bond penalty.

Honesty Blanket Position Bond Coverage – Insures against loss sustained by the insured through any dishonest act committed by any of the employees. The amount of coverage on each employee is the stated limit of liability.

Faithful Performance Blanket Bond Coverage – Insures against loss sustained by the insured through any dishonest act committed by any employees and failure to faithfully perform their duties or account properly for all monies to an amount not exceeding the stated limit of liability. Recovery is limited to the bond penalty.

Faithful Performance Blanket Position Bond Coverage – Insures against loss sustained by the insured through any dishonest act committed by any of the employees and failure to faithfully perform their duties.  The amount of recovery on each employee is the stated limit of liability.

Who is Required by Law to be Bonded:

Tit. 11 § 8-105. Certain officers to give bond

The municipal governing body shall require the municipal treasurer, any officer or employee designated by ordinance to sign municipal warrants or municipal checks, and any other officers or employees as the governing body may designate by ordinance, to give bond for the faithful performance of his/her duties within 10 days after his election or appointment, in such amount and form as the governing body shall prescribe. The municipality shall pay the premiums on such bonds.

Tit 11 § 1-102. Definition

“Officer or official” means any person who is elected to an office in municipal government or is appointed to fill an unexpired term to an elected office, and the clerk and the treasurer whether elected or appointed. When “officer” or “official” is modified by a term which refers to a personnel position or duty, the holder of the position or duty is not an officer or official of the municipality for any purpose.    

Tit. 11 § 27-111. Bond of clerk and judge

A.    The clerk of each municipal court shall give bond to the governing body of the municipality where the court is established. The bond shall be approved by the governing body and shall be in an amount to be fixed by the governing body. 

B.     The municipal governing body may provide that the judge, the alternate judge, and an acting judge, or any of them, shall give a bond to the governing body of the municipality where the court is established. If bond is required, it shall be in an amount to be fixed by the governing body. It shall be conditioned in the same manner as the bond that is required of the clerk of the court, and it shall be approved by the governing body.

Please contact the OMAG Underwriting Department for the appropriate application.