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The Importance of Proper Risk Transfer in Liability Claims

When public agencies contract with third-party vendors for services such as road repair, the stakes related to risk transfer are high. If risk transfer is not completed correctly, the public agency can face severe exposure related to liability claims.

In this article, the Authority highlights a liability case in which proper risk transfer was essential to a successful outcome for the member and the Authority.

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In the case of Roberts v. City et al., a solo bicyclist accident allegedly occurred because of an unmarked pothole/depression in the bicycle lane near 1500 Descanso Drive. The plaintiff alleges that there was no warning of the defect. However, historical Google images confirm that there was paint around the depression the month before the incident. It is unclear who painted the defect; however, it is anticipated to be a marking by the city, Los Angeles County Department of Public Works, or Sequel Contracting identifying an area in need of repair, which suggests that there was actual notice of the defect before the incident.

As a result of his fall, 69-year-old Mr. Roberts sustained serious injuries, including an open fracture of the left collarbone, six fractured ribs, and two fractures in his right hand.  He was transported to the emergency room and was in the intensive care unit for 24 hours. Treatment consisted of shoulder surgery, extensive physical therapy, and addressing his post-accident vertigo.

An evaluation of city records revealed that a contract had been awarded to Sequel Contracting in late 2021, and a resurfacing project was completed on June 30, 2022. The incident occurred on October 2, 2022, relative to the completion date. Hence, a tender of defense and indemnity was appropriate for the city. City staff quickly located the necessary documents, including a Certificate of Insurance for Sequel naming the city as an additional insured. Carl Warren tendered the matter during the claims stage, and Sequel’s insurance carrier accepted the tender for defense and indemnity. Thus, the city and the Authority have extinguished the exposure to the significant injuries sustained by the plaintiff. If forced to defend this case, it would likely have had a settlement value in the $750,000 to $1,000,000 range.

Contact your regional risk manager and/or consult the Authority’s Contractual Risk Transfer Manual for more information about risk transfer.

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