SB 0591 - Fiscal Note

Fiscal Note - SB 0591 - Increases maximum liability of the state and political subdivisions

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2667-01

BILL NO. SB 591

SUBJECT: Courts: Sovereign Immunity

TYPE: Original

DATE: January 20, 1998

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue*	(Unknown)	(Unknown)	(Unknown)
State Road Fund	(Exceeds $1,308,385)	(Exceeds $1,617,164)	(Exceeds $1,665,679)
Conservation Commission Fund	(Unknown)	(Unknown)	(Unknown)
Insurance Dedicated Fund	(Unknown)	(Unknown)	(Unknown)
DNR Dedicated Fund	(Unknown)	(Unknown)	(Unknown)
Total Estimated Net Effect on All State Funds	(Exceeds $1,308,385)	(Exceeds $1,617,164)	(Exceeds $1,665,679)

* Unknown fiscal impact (cost) -- expected to exceed $200,000 in any given year.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
DNR Federal Fund	(Unknown)	(Unknown)	(Unknown)
Total Estimated Net Effect on All Federal Funds	(Unknown)	(Unknown)	(Unknown)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 8 pages.

FISCAL SUMMARY (continued)

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	Exceeds ($1,000,000)	Exceeds ($1,000,000)	Exceeds ($1,000,000)

FISCAL ANALYSIS

ASSUMPTION

Officials from the Missouri Department of Transportation (MoDOT) assume the proposed legislation would have a substantial negative fiscal impact on the State Road Fund. MoDOT assumes the actual impact would depend on the number of additional claims filed against MoDOT, the total amount of the medical expenses incurred by the litigants, and the size of the verdicts entered in those cases. MoDOT further assumes that the medical expenses would not be subject to a limit. Based on the claims rendered in FY 1997, this proposal would cost MoDOT over $1,200,000 annually. MoDOT assumes it is impossible to predict the number of cases which would exceed the cap each year, therefore, they have based their calculations for this proposal on FY 1997 figures. The figures for general damages would be adjusted in subsequent years to reflect the price index provision in Section 537.610.5. Additionally, based on the fact that the claimants could expect larger jury verdicts, MoDOT assumes this proposal would likely result in an increase in the number of cases filed against MoDOT. Overall, MoDOT assumes the fiscal impact resulting from this proposal would exceed $1,200,000 annually.

Oversight agrees this proposal would result in a substantial negative fiscal impact on the State Road Fund. Based on the claims rendered in FY 1996, this proposal would cost MoDOT over $1,848,663 annually. Oversight assumes an average of the costs based on FY 1996 claims and FY 1997 claims would result in a cost to MoDOT over $1,524,332 annually.

Officials from the Office of Administration - Division of Risk Management (COA) assume the proposal would likely cause at least one judgment annually against the state to exceed $100,000 and has estimated the additional cost to be in excess of $200,000 annually.

Officials from the Office of the Attorney General (AGO) assume the proposal could have a significant fiscal impact on their agency, as it could result in more lawsuits being filed due to the increased liability limits. AGO has stated that the amount of the costs are unknown, as they will be dependent on the amount of increased litigation resulting from this proposal.

Officials from the Department of Natural Resources (DNR) assume the proposal could result in significant unknown costs to the State Parks Fund and other DNR Dedicated Funds, as well as Federal Funds allocated to DNR. DNR assumes that the Office of Administration, Division of Risk Management, has calculated and reported the risks for these types of cases. In addition, DNR assumes that the Attorney General's Office would continue to litigate these cases for DNR.

Officials from the Department of Elementary and Secondary Education (DES) assume the proposal could have an unknown fiscal impact on their agency. DES officials further assume the Office of Administration, Division of Risk Management, has calculated and reported the risks associated with this proposal. Additionally, DES assumes there could be a fiscal impact on school districts, as this proposal would cause an increase in insurance costs by raising the liability limits for state agencies and political subdivisions.

Officials from the Office of the Secretary of State (SOS) assume the proposal could result in a judgment or settlement against the state that is currently barred under principles of sovereign immunity. SOS further assumed any judgment could result in an increase in litigation costs from lawsuits in which the state would ultimately prevail, but would have either been summarily dismissed or never filed under existing law. Overall, SOS assumes the costs associated with this proposal would be potentially significant, but unknown.

Furthermore, this proposal would require the SOS to publish the current value of the limitation on awards for non-economic damages once per year in the Missouri Register. In response to a similar proposal last session, SOS stated that the publication of this information would only require one page of space in the Missouri Register. SOS based their assumption on the fact that their office currently publishes the limitation on non-economic damages in tort actions based on improper health care. SOS assumed their agency could absorb the cost for publication of one additional page in the Missouri Register.

Officials from the Missouri Department of Insurance (MDI) assume the proposal would result in an increase in expenditures which would be paid from the Insurance Dedicated Fund. This fund is financed by license fees established by statute. The fees are not indexed for inflation, therefore, an increase in expenditures would reduce the fund balance. However, MDI assumes that any reduction in the fund balance would be minimal and most likely would not have a significant fiscal impact on their agency.

Officials from the Missouri Department of Conservation assume the proposal could have an unknown fiscal impact on the Conservation Commission Fund.

Officials from the City of St. Louis - Budget Division assume there would be an increase in the liability limits of judgments rendered against their city in some instances. The City of St. Louis is self-insured and therefore assumes this proposal would result in increased costs in excess of $1,000,000 annually. The City of St. Louis currently settles approximately four or five cases annually for $100,000 each. This proposal would increase the liability limit to $300,000 each plus unlimited medical expenses, thereby possibly increasing each settlement by $200,000 or more. Additionally, the City of St. Louis assumes the increase of liability limits in accordance with the Implicit Price Deflator for Personal Consumption Expenditures could increase liability limits significantly. For example, the reported figures for medical malpractice cases were increased by 43% in nine years.

Oversight assumes the proposal would have a significant fiscal impact on many political subdivisions, as it would increase the limits of liability for activities which are afforded protection based on sovereign immunity. Many political subdivisions which currently participate in insurance pools would likely experience rate increases as a result of this proposal. It is apparent that self-insured political subdivisions would be significantly impacted. Overall, Oversight assumes that the fiscal impact on local governmental funds would likely exceed $1,000,000 annually.

In response to a similar proposal, officials from the University of Missouri-Columbia (UMC) assumed there would be a fiscal impact on their budget, as the amount that could be recovered in suits against UMC would be increased from $100,000 to $300,000 plus medicals. UMC further assumed the fiscal impact would be difficult to estimate but could exceed $100,000 annually.

In response to a similar proposal last session, officials from the City of Kansas City assumed there would be a significant fiscal impact on their budget. Kansas City is self-insured; therefore, all judgments obtained against the city (including claims and lawsuits) are paid entirely by the city out of its General Revenue Fund. Kansas City averages two to three new wrongful death lawsuits per year and approximately ten new tort lawsuits not involving a death, but involving damages which may reach the liability cap limitations. Projecting increased liability under the proposal based on current lawsuits, officials from Kansas City previously estimated an increase in liability for Kansas City in the approximate amount of $2,700,000 annually.

Officials from the Department of Public Safety, the Department of Health, the Office of State Courts Administrator, and the Missouri Gaming Commission assume the proposal would have no fiscal impact on their agencies.

In response to a similar proposal last session, the following agencies assumed there would be no fiscal impact on their agencies: the Department of Revenue, the Department of Corrections, the Department of Labor and Industrial Relations, the Coordinating Board for Higher Education, the Department of Social Services, the Department of Economic Development, the Missouri Veterans Commission, the State Tax Commission, the Department of Agriculture, the Office of the State Auditor, the Office of the State Public Defender, the Office of Prosecution Services, the Office of the Governor, the Office of the Lieutenant Governor, the Missouri Senate, the Missouri House of Representatives, Missouri Western State College, Central Missouri State College, Harris-Stowe State College, and Truman State University.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Costs - Office of Attorney General	(Unknown)	(Unknown)	(Unknown)
Costs - Department of Natural Resources	(Unknown)	(Unknown)	(Unknown)
Costs - Office of Administration *	(Unknown)	(Unknown)	(Unknown)
* Total fiscal impact is unknown, but costs are expected to be at least $200,000 annually.
STATE ROAD FUND	(Exceeds	(Exceeds	(Exceeds
Costs - Department of Transportation	$1,308,385)	$1,617,164)	$1,665,679)
CONSERVATION COMMISSION FUND
Costs - Department of Conservation	(Unknown)	(Unknown)	(Unknown)
INSURANCE DEDICATED FUND
Costs - Department of Insurance	(Unknown)	(Unknown)	(Unknown)
DNR DEDICATED FUNDS
Costs - Department of Natural Resources	(Unknown)	(Unknown)	(Unknown)
FISCAL IMPACT - Federal Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
FEDERAL FUNDS
Costs - DNR Federal Fund
Total fiscal impact is unknown, but costs could exceed $100,000 annually.
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)

LOCAL GOVERNMENTAL ENTITIES

Total fiscal impact is expected to exceed $1,000,000 annually. This would be entirely

dependent on the number of claims filed, the total medical expenses incurred by the litigants,

and the resulting judgments.

FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

The proposal would increase the amount of liability for the state or political subdivisions from $1,000,000 to $2,000,000. It would also increase the maximum liability for persons from $100,000 to $300,000. Both increases would add a provision stating that coverage is in addition to reasonable and necessary medical expenses. Additionally, the proposal would provide for annual review of the limitation on awards based on an economic price index.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Missouri Department of Transportation

Office of Administration - Division of Risk Management

Office of the Attorney General

Department of Natural Resources

Department of Elementary and Secondary Education

Office of the Secretary of State

Missouri Department of Insurance

Missouri Department of Conservation

University of Missouri-Columbia

Department of Public Safety

Department of Health

Department of Revenue

Department of Corrections

Department of Labor and Industrial Relations

Coordinating Board for Higher Education

Department of Social Services

Department of Economic Development

Missouri Veterans Commission

State Tax Commission

Department of Agriculture

Office of the State Auditor

Office of the State Public Defender

SOURCES OF INFORMATION (continued)

Office of Prosecution Services

Office of State Courts Administrator

Office of the Governor

Office of the Lieutenant Governor

Missouri Gaming Commission

Missouri Senate

Missouri House of Representatives

Missouri Western State College

Central Missouri State College

Harris-Stowe State College

Truman State University

City of St. Louis - Budget Division

City of Kansas City - Budget Division

Jeanne Jarrett, CPA

Director

January 20, 1998