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Liability Reform Efforts Gain Momentum as Local Governments Push for Change

Over the past decade, liability claim costs for California public agencies have climbed dramatically. The California Association of Joint Powers Authorities recently published one of the largest studies ever conducted on local government liability in the state. The Protecting Public Funds Data Project collected and analyzed claims data from more than 1,900 cities, counties, schools, and special districts.
Annual claim costs rose from $392 million in 2018 to $1.2 billion in 2025 and are projected to reach $2.1 billion by 2028. As high as these figures are, they understate the scope of the problem because many large, self-insured jurisdictions did not participate in the study. The analysis also documented sharp increases in high-severity claims and insurance premiums. These findings were presented by a panel of public-sector leaders at the League of California Cities Annual Conference in September.

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The panel also highlighted The Cost of Claims: What It Means for California’s Communities, an academic study published by the Pepperdine School of Public Policy and Beacon Economics. It found that liability costs are outpacing inflation, driven largely by the rise in high-severity claims. Claims exceeding $1 million now account for 70 percent of total claim costs, up from 37 percent in 2011. And because large claims take longer to resolve, liabilities are staying on public agency balance sheets longer. Old claims linger, while new claims continue to pile up.

For local officials and management teams, the consequences reach well beyond insurance and litigation. As claim payments, self-insured retentions, and insurance premiums absorb a growing share of public resources, cities face difficult funding choices—and community services are often the first to feel the pinch. Research suggests that these pressures will not ease unless policymakers take on major local government liability reform.

Proportionate Liability Is Needed

One driver of runaway liability costs is the unfair way California’s joint-and-several liability rule treats local governments. In cases with multiple defendants, any one of them can be required to pay the plaintiff’s full economic damages, including past and future medical expenses, lost wages, and property damage—even when its share of fault is minimal. This invites “deep pocket” targeting, which is why so many local governments are named in lawsuits for harm primarily caused by a third party.

The result is that taxpayers cover costs far beyond the public agency’s actual share of fault. The broader social and public policy question is this: Should a city be forced to pay for every tragic accident that occurs on public property, simply because the other parties who are primarily responsible cannot pay? This problem arises often in catastrophic injury cases involving uninsured or underinsured drivers who cause vehicle accidents. Concerns such as these helped to put local government liability reform on Sacramento’s agenda in 2025 and 2026.

Senate Bill (SB 577) and the Need for Broader Reform

The most notable development in 2026 related to local government liability reform was Senate Bill 577. The bill primarily addressed childhood sexual assault claims against public entities, with provisions for heightened evidentiary standards under certain conditions, prevention measures, oversight rules, and penalties for attorneys who bring claims in bad faith. Notably, however, the bill also amended Civil Code Section 1431.2 in a way that directly benefits California JPIA members and all public entities.

Under the revised code, in civil actions filed on or after January 1, 2027, a public entity found 15 percent or less at fault will pay only its proportionate share of economic damages. If the public entity is found to be more than 15 percent at fault, joint-and-several liability will continue to apply. The Governor signed the bill into law on September 30, 2026.

This is not a comprehensive solution, but it is incremental progress: a small step toward aligning financial responsibility with each defendant’s actual share of fault. Because the new rule applies only when a public entity is found 15 percent or less at fault, its effect on overall liability costs will be limited. Still, it is an important acknowledgment by the Legislature and the Governor that these reforms are both timely and necessary.

This first step toward proportionate liability for economic damages was made possible by growing collaboration among local governments, risk-sharing pools, and municipal associations. Together, we are showing policymakers how escalating liability costs divert limited funds away from community services that residents rely on. The Coalition to Protect Community Services—led by the California JPIA—was instrumental in moving this conversation forward in 2026. To all who participated, thank you for supporting the Coalition’s efforts and for allowing us to use your agency logos on our correspondence with the Capitol. It truly helped to amplify our impact.

Looking Ahead

SB 577 marks modest progress, but the conversation about public entity tort reform is far from over. The Pepperdine and Beacon Economics study offers data-supported reform recommendations that will be brought before policymakers in 2027: (1) adopting modified comparative negligence standards, (2) developing liability guardrails around dangerous-condition-of-public-property claims, (3) strengthening design immunity, (4) establishing a higher level of proportionate liability, (5) revising the collateral source rule, and (6) instituting structured damage caps. Together, these reforms would protect taxpayer funds for broad community benefit, while still fairly compensating people who are legitimately harmed by local government negligence. The two goals are not mutually exclusive; balanced, thoughtful reforms can achieve both.

For city leaders who discuss these issues with state legislators and officials, the central challenge is balancing fair compensation for injured parties with the need to preserve public resources for their intended purpose. This is not merely a conversation about insurance, litigation, or legal nuance. It is fundamentally about protecting community services. Residents depend on local governments for roads, libraries, senior centers, parks, public transportation, and public safety. Every dollar spent on liability claims is a dollar that never reaches residents. Public entity tort reform should be an urgent priority for the California Legislature in 2027, and the Authority’s Coalition to Protect Community Services will continue to expand and engage in meaningful dialogue with lawmakers.

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