Cities across California are increasingly warning that rising litigation costs are putting serious pressure on municipal budgets. In Fairfield, California, city officials say liability insurance, coverage that helps governments pay legal costs and damages if they are sued, and large jury awards are becoming major drivers of local government financial strain.

During a Fairfield City Council meeting, City Manager David Gassaway described the city’s growing fiscal challenges and the role liability costs are playing:

“Now, the mayor touched on it, but at the end of any good year served, right, the bill does come due. And so, as the mayor mentioned, we have a structural deficit. A couple years ago, we estimated that structural deficit to be around $20 million. We have made strides. Right now, in our current adopted fiscal year budget, we project about an $11 million deficit. That’s because of cuts that we have made. We continue to have inflationary pressures on things that are far outside our control.”

Gassaway then highlighted one of the fastest-growing cost drivers for cities, general liability insurance tied to litigation exposure:

“General liability insurance, right? This is one of the things that we have our legislative platform coming to the city council here next month. Tort reform for local governments is something that we have to have a serious conversation in the state of California about. Our general liability insurance in the last four years is up more than 160%. That is unsustainable.”

He also warned that large jury awards are increasingly driving those rising costs:

“And we see these, you know, there’s jury awards for tragic situations that are disproportionately out of whack with the, you know, cost of what that tragedy is. And so we see massive awards being given. And those are some of those things that are outside of our control that are cost-increased pressures that we’re doing our best to deal with.”

Gassaway cited how Fairfield previously encountered an anticipated structural deficit of $20 million; and, through spending reductions, this shortfall has been diminished to around $11 million. Even so, escalating expenses beyond the city’s influence, particularly general liability insurance premiums, which officials report have surged by over 160% in four years, persist in exerting pressure on the city’s financial resources.

California legislators must heed the warnings issued by local authorities. As liability expenses and litigation threats escalate, the repercussions extend beyond the courtroom, impacting taxpayers and local services. If decision-makers aim to safeguard municipal budgets and guarantee that communities can uphold vital services such as public safety, infrastructure, and parks, they must initiate a meaningful dialogue regarding equitable legal reforms that tackle excessive liability costs faced by local governments.