LA’s Liability Claims Are Out of Control

Pension moneyLA WATCHDOG – Liability claims against the City of Los Angeles have caused continuing nightmares for the City’s budget mavens.

Over the last five years, the total payouts and settlements for legal actions totaled $541 million, an average of $108 million a year, double the amount for the previous five years (2009-2013) of $264 million, an average of $53 million a year.

This problem has been compounded by the fact that the City has underestimated its Liability Claims as payouts and settlements over the past five years have exceeded the budgeted amounts by $234 million, an average of almost $50 million a year.

Granted there have been several large payouts and settlements, including significant sums to settle a housing-related lawsuit by a disability rights group, a $1.4 billion settlement to repair our sidewalks over the next thirty years, numerous police department related lawsuits, and the settlement of the class action lawsuit involving the City’s illegal Telephone Users’ Tax.

Just last week, the Leo Baeck Temple filed a lawsuit against the City of Los Angeles, claiming the City was negligent as it failed to clean up a homeless encampment nestled in hills of Bel-Air.  This was despite repeated complaints and warnings to Councilman Paul Koretz and his office as well as to the Police and Fire Departments.  Unfortunately, the December fire that started at this encampment burned almost 500 acres, damaged the Leo Baeck Temple, disrupted life in Bel-Air for several days, caused the cancellation of schools, closed and delayed traffic on the very busy 405 through the Sepulveda Pass, destroyed six homes, and damaged a dozen homes in one of the priciest areas of the City.

The lawsuit does not specify damages, but if all the homeowners join the temple, the loss to the self-insured City could very easily reach $20 to $30 million, not including any punitive damages because of the negligence of the Councilman and the City.

According to several insiders at City Hall, payouts and settlements will exceed the $89 million budgeted this year for Liability Claims.  This will increase the existing budget deficit that is estimated to be in the range of $250 million when considering raises for the civilian workers whose contract expired on June 30, the raid on the City’s rainy-day funds, questionable new revenues, and unidentified efficiencies.

Unfortunately, the City Attorney has developed a reputation for being an easy target, a soft touch, where the plaintiffs’ bar is able to extract large payouts and settlements because the City is afraid to go to court because of the fear of runaway juries, especially in cases involving perceived police misconduct.

One solution is to reform the judicial system by passing laws that will make California less of a “judicial hellhole,” where the defendants, including the City, have the opportunity for a fair trial. But this will difficult as the plaintiffs’ bar has considerable political clout in Sacramento as it is a generous contributor to our State’s politicians.

While the higher payouts and settlements may be the “new normal” and probably are going to get worse because of all the disability, discrimination, and workplace litigation, the City should at least develop a realistic Liability Claims budget so the City does not have to raid the Reserve Fund or issue Judgement Obligation Bonds to fund the cash outflow, dumping the burden on the next generation of Angelenos.

Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  lajack@gmail.com.

This article was originally published by CityWatchLA