Opinion ID: 2156954
Heading Depth: 2
Heading Rank: 2

Heading: Town of Rutland

Text: Plaintiffs next contend that the doctrine of sovereign immunity does not protect Rutland from suit. Traditionally, courts have held municipalities liable only where the negligent act arises out of a duty that is proprietary in nature as opposed to governmental. Hillerby v. Town of Colchester, 167 Vt. 270, 272, 706 A.2d 446, 447 (1997). Municipalities may, however, waive immunity by purchasing liability insurance. See 29 V.S.A. § 1403. Plaintiffs do not argue that Rutland's maintenance of the intersection is proprietary; [2] rather, plaintiffs contend that Rutland has waived immunity to the extent that it has purchased excess liability insurance, also referred to as reinsurance. A municipal corporation may, in the name of a municipality, contract with an insurance company to secure all forms of liability insurance. See 24 V.S.A. § 1092. When a municipal corporation purchases a liability insurance policy under § 1092, it waives its sovereign immunity from liability to the extent of the coverage of the policy and consents to be sued. 29 V.S.A. § 1403. The Legislature, however, has specifically authorized municipalities to enter into intermunicipal agreements for liability insurance purposes, see 24 V.S.A. § 4942, participation in which does not constitute a waiver of immunity. See id. § 4946. The statute specifically provides that: two or more municipalities may form an association under the laws of this state to develop and administer an intermunicipal risk management program, having as its purposes reducing the risk of its members; safety engineering; distributing, sharing, and pooling risks; acquiring insurance, excess loss insurance, or reinsurance; and processing, paying, and defending claims against the member of such association. Id. § 4942 (emphasis added). Furthermore, such [p]articipation by a municipality in an agreement or association established hereunder shall not create joint and several liability as a result of any act or omission of any other municipality or association, nor shall such participation constitute a waiver of sovereign immunity under 29 V.S.A. § 1403.  Id. § 4946 (emphasis added). Rutland was a member of the Property and Casualty Intermunicipal Fund (PACIF), which is managed by the Vermont League of Cities and Towns (VLCT). Through its VLCT PACIF membership, Rutland had liability coverage in the amount of $2,000,000, the first $150,000 of which was derived from PACIF funds. Commercial carriers, with which VLCT PACIF contracted, provided the excess or reinsurance. Although plaintiffs concede that the first $150,000 of Rutland's coverage does not constitute a waiver of immunity under § 1403, they argue that immunity is waived to the extent of the reinsurance. In other words, according to plaintiffs, the reinsurance provided by commercial carriers is not the same type of self-insurance as that derived from VLCT PACIF funds, the latter being the only type of insurance the Legislature exempted from effectuating waiver under § 1403. Therefore, plaintiffs argue that Rutland has waived immunity to the extent of $1,850,000 for any claim in excess of $150,000. Plaintiffs' argument is defeated by a plain reading of the statutory scheme. A waiver of a municipality's immunity under § 1403 occurs when a municipal corporation itself purchases liability insurance. Such waiver does not occur when insurance or reinsurance is acquired through participation in an intermunicipal insurance agreement such as VLCT PACIF. It is the manner by which the insurance is obtained, not the commercial nature of the provider, that is determinative of waiver. Since Rutland obtained its liability coverage through membership in VLCT PACIF, it did not waive its immunity from plaintiffs' suit.