Why the city doesn't pay road damage claims
by Jan Schlain
From the June, 2014 issue
In early March, Joe O'Neal turned his Subaru Legacy off S. Main St. onto Hoover, hit a bad pothole, and blew out two tires. The tow cost him $72, and because he had all-wheel drive, he had to replace all four tires. That cost $682.04.
O'Neal knew that if a hazard on his own property damaged someone's car, he'd be financially liable. Since it was the city's pothole, he figured the city should take responsibility. He went to a2gov.org, found a form for filing a claim with the city's insurance board, explained what happened, and asked to be reimbursed.
The city denied his claim, but it was nothing personal. By mid-May, thirty-one people had filed road damage claims, and every one was denied. After last year's much milder winter, eight people filed road damage claims. The insurance board denied all of them, too.
O'Neal admits the rejection wasn't a complete surprise. He'd been following the story of eighty-two-year-old Cynthia Kokkales since last fall.
One day last September, Cynthia Kokkales discovered she had no water. The city had just replaced the water main in front of her home on W. Madison. That sometimes loosens deposits in the pipe, causing them to plug a screen that protects the water meter. But as her son Dean--a superintendent at O'Neal Construction--tells it, a city worker took off the meter, found nothing, and said, "I think your line has collapsed ... There's nothing I can do. You'll have to get ahold of a plumber."
She went that night without water. The next day, Dean continues, a plumber came out, called the city's field service office, and said, "I need you to come out to turn the valve out on the street to see what's going on in the house."
"The city says, 'I can't come out until you pull a permit,'" Dean continues. So the plumber went down to City Hall and paid the $95 fee for the proper permit.
A city worker turned off the
water, and then the plumber took the water meter off and replaced her shutoff valve. But she still had no water.
"Sand was caught in the line," Dean explains. "We flushed it with a coat hanger, turning the valve on a little bit ... the sand got stuck in the ninety-degree turn up through the floor." He thinks the reason the city employee found nothing is "because the sand didn't reach it. When we flushed the sand out, the city guy said, 'That's us.'"
O'Neal has a theory about how it happened. The city had just replaced the main on her street. "Where the city disconnects and reattaches the new service," he says, "they did that connection underwater," and the water carried the sand into Mrs. Kokkales's water line.
The plumber's bill was a whopping $835.91, including the city's $95 fee. Dean filed a claim for full reimbursement on behalf of his mom. In December, he received a letter from Laurie O'Malley, a senior claims adjuster with Hylant Administrative Services. The city was denying the claim, O'Malley wrote, because there was "no indication that there was dirt or anything else in the line that would cause the blockage."
That's not true, says Dean--he still has a plastic bag of sand that came out of the blocked pipe. He filed an appeal. In March, the city denied the appeal, this time offering another reason: unless its employees are grossly negligent, it's immune from liability for their actions.
"It comes right back to this concept of governmental immunity, which started way back in England," says senior assistant city attorney Bob West. "The king said, 'You can't sue me.'"
Sitting in a small makeshift office on the fourth floor of City Hall while his usual floor is being stripped of asbestos, West turns to his computer, types in "State of Michigan, 1407," and quotes the statute that comes up:
"Immunity from Tort Liability. Intentional Torts," he reads. "Except as otherwise provided in this act, a governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function.'
"Pretty broad," he adds.
West and chief assistant city attorney Abby Elias sit on the city's Board of Insurance Administration with representatives from Hylant, city field services, and Sarah Singleton, who works in risk management and processes all of the city's claims. The two voting members are a city councilperson, currently Jane Lumm, and the city treasurer, Matt Horning.
"We meet once a month and discuss claims that are filed against the city," West says.
"Let's assume that something a city worker did allowed sand to enter [Mrs. Kokkales's] pipe. Assuming that to be the case, what would the legal basis be for bringing an action against the city?
"The State of Michigan has deemed that government units--cities, townships, whatever--are immune from tort liability for simple negligence." So, West explains, "unless you can fit your claim into one of six specific exceptions to immunity, the insurance board will reject your claim. What are these six specific exceptions?" West runs down them fast:
"Defective highway. That is, there has to be a defect in the travel portion of the highway making it unsafe for travel. We'll get back to that in a minute with the pothole claim.
"Defective public building. Brick falls off of City Hall and lands on your head. Arguably a defective public building claim.
"Negligent operation of a government vehicle. Our garbage truck runs you over."
(West whispers, "That's happened. We actually just backed right over him. We didn't run over him with the tires, but we backed right over him. An old guy, he fell down.")
"Negligent operation of a government hospital. Obviously we don't have a hospital, but U of M is a government hospital. That's how they can get sued for med-mal.
"Sewer backups, although not all.
"And finally, if an operation of the government is being run as a profit-making enterprise."
That brings West "back to our case of the city worker being somehow negligent and allowing sand to get in the line. OK. Even if you assume he's negligent, what theory of liability can you fit that into? It's not a defective highway claim, because [that relates to] the surface of the road, not the pipes underground.
"It's not a defective sewer claim ... This is not a sewer backup, this is a water supply issue.
"It's not a defective government building. It's not a negligent use of a government vehicle, or hospital--it doesn't fit into any of the claims.
"So--you can't sue." Or at least, West says, you can't win.
It seems unfair.
"I agree," says West. "You equate some sense of fairness, that someone else's wrongful conduct shouldn't result in your suffering. I get that." But "because it is a governmental entity, we enjoy a greater level of protection.
"In the end it comes down to, 'There's just so much money to go around. How do you want to spend it?'"
When the city does pay a claim, West explains, it comes out of its insurance fund. "We have insurance, as a city, but our deductible, or as it's termed, 'self-insured retention,' is half a million dollars.
"In the industry, that's low. There are a lot of cities out there that can't afford insurance, unless their deductible is like a million bucks.
"The reason ours is so low is because we have a very healthy claims loss record, meaning that we don't pay out a lot of claims. We don't get hit big very often. We don't get hit at all very often.
"It's taxpayers' money," West points out. "The city council has to vote to expend those funds." The insurance board's decisions are legally just recommendations to council. "And the council has the fiduciary responsibility to spend public money only if it is legally compelled to do so, at least in this context.
"That is to say, we get a lot of claims, every month, where there is a real sympathy factor involved. We really want to do something for this person. But legally we're not compelled to. It would be a breach of the council's fiduciary duty--to protect the money of the entire taxpayers as a whole--to single out somebody as a charity case and say, 'It's a really sad story--here, take some money.'
"So if we aren't legally bound to pay a claim, we don't."
The city doesn't deny every claim. According to Singleton, of the eighty-two claims filed against the city in 2013, eighteen were approved. The total amount paid out of the insurance fund was $28,639.13.
What does it take to win a claim against the city? "Our garbage truck whacked somebody's car," West says. "Did three thousand dollars' damage. We paid three thousand dollars. It was a parked car."
But back to Mrs. Kokkales's pipe. Even if O'Neal is right about how the "quote, 'sand,'" got there, West says, that sounds to him like simple negligence. To prove gross negligence, "you'd have to show that a city employee intentionally put it there and said, 'It's gonna plug her pipe, and I don't give a darn.'"
As for O'Neal's tires, West says, the reason the city almost never pays pothole claims is that "the government has to have actual knowledge of the defect and a reasonable time to repair it. It's that lack of notice, or reasonable time to make the repair, that usually prevents a pothole claim from being viable.
"Show us that that thing was there for more than thirty days. Show us that we had actual knowledge."
The only pothole claim he can ever recall the city paying was on Huron Street a couple of winters ago. "It was particularly bad that time," recalls West. The insurance board denied the claim, and the young man sued the city in small claims court. "He won five hundred bucks. It was just going to cost more staff time [to fight it]. It was a business decision," says West.
West adds that the city's pothole repair program runs basically 365 days a year: "We have a pothole repair hotline and a link through our website."
"I will not pursue the City any further," O'Neal emails. "It would be a waste of time. However, I think they should have a better, more proactive, year-round pothole activity. I think it a misnomer to call their program a 365 day a year operation!"
West concedes that there are times when filling holes with "cold patch" doesn't do much good: "If you're plugging it in the middle of a rainstorm in February, nothing is going to last. If you put it in, it's not going to harden; it's going to get squished right out again.
"The cold patch stuff we throw into those holes is what most people throw into those holes. It works, but it doesn't work well in the freezing-thawing cycles that typically spawn the potholes. We have to do something, so we do ... over and over and over again."
City communications specialist Robert Kellar emails that once the asphalt plants reopened, the crews switched to "hot patch ... which is a more permanent fix." Major rebuilding projects also are underway. But, he notes, "we have only the resources to fill pot holes that the state gives us ... from gas taxes and weight fees."
So drivers will be hitting this year's bumper crop of pot holes for a while. They just shouldn't expect any compensation from the city when they do.
"If it weren't for the government," says West, "if it were GM, creating a faulty automobile, and it caused your son or daughter to be injured, now you have a great cause of action, because they don't have immunity."
Not the greatest example, since, as a result of its government-supervised bankruptcy, the "new" GM is immune from product liability or wrongful death claims arising from accidents that occurred before it emerged from bankruptcy in July 2009.
"That's a whole other story," says West.
[Originally published in June, 2014.]